Difference Between Fundamental And Technical Analysis

The analysis of financial statements is based on the use of ratios or relative values. Financial statements are used to evaluate the condition of a firm and its financial performance. The measurement and evaluation of information presented in the financial statement is known as analysis and interpretation of financial statement, of which is the relationship between financial statements and decision making process.

The purpose of performance analysis is to know the operational efficiency and profitability of the company. Performance analysis does overall analysis of the company and helps to know the financial position of the company. A company’s financial position tells investors about its general well-being. Financial management involves planning and forecasting financials based on the strategic goals of the company and regularly reviewing actual performance against the forecasts, performance analysis helps in this process. Financial statements are referred for the purpose of performance analysis. Tool used is ratio analysis. Ratios give quantitative analysis of information contained in company’s financial statements as balance sheet, profit and loss

Trend analysis reviews past data and tries to predict the future . A ratio analysis is a quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items in financial statements like the balance sheet, income statement and cash flow statement; the ratios of one item – or a combination of items - to another item or combination are then calculated. Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to check whether they are improving or deteriorating. (https://www.investopedia.com/terms/c/capitalization-ratios.asp)

There are three main tools of Analysis. The first tool is the horizontal analysis. This method reviews a series of a company’s financial statement data over time period. This helps determine if an increase or decrease in sales. The formula for this method is by taken the current year amount subtract by the base amount divided the base year amount. The second method is the vertical analysis. This method evaluates the financial statement by expressing each as a percent of a base amount.

There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book "A Random Walk Down Wall Street". What does a random walk mean? The random walk means in terms of the stock market that, "short term changes in stock prices cannot be predicted". So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of "purchasing assets to gain profit in the form of reasonably

In financial analysis, analysts use the financial data to monitor and evaluate a firm’s financial position, to plan the future financing, and to reallocate the size of the company and its rate of growth. Financial analysis involves examination of the historical data to achieve the information about the current and future the financial health of the company. They may work in the forecasting and profit analysis. They, like the accountants, prepare the reports. They prepare budget report, work in cost and general account. They analyze the changes in production and service to determine the effects on costs. They work on the graphs. They use statistic to compare the standard costs to the actual costs. They also study the significances of alternative ways of investing money in a particular field. They usually work for the large financial institutions. Particularly, they work

| Generally good use of relevant discipline knowledge and theory to analyse a financial issue; Analysis demonstrates understanding of, and addresses, most key aspects of the issue; Analysis of most key elements supported by relevant financial data

There are three steps needed to prepare a financial analysis. The first step is to establish the facts about the organization, which would include reviewing the financial statements such as the balance sheet, statement of operations, statement of changes in net assets and the statement of cash flows. The second step is to compare those facts over time, to the facts of similar organizations and to include vertical, horizontal and ratio analysis in the process. Ratio analysis includes liquidity, profitability, activity and capital structure. The third step in preparing a financial analysis is to use judgement and perspective to evaluate the comparisons and make decisions (Norwicki, 2015).

There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book “A Random Walk Down Wall Street”. What does a random walk mean? The random walk means in terms of the stock market that, “short term changes in stock prices cannot be predicted”. So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of “purchasing assets to gain profit in the form of reasonably

with the massive amount of numbers in company financial statements. For example, they can compute the percentage of net profit a company is generating on the funds ithas deployed. All other things remaining the same, a company that earns a higher percentage of profit compared to other companies is a better investment option.

Ratio analysis is generally used by the company to provide some information on how the company has performed during that year, so that the parties involved including shareholders, lenders, investors, government and other users could make some analysis before making any further decision towards that particular company. As mentioned by Gibson (1982a cited in British Accounting Review, 2002 pg. 290) where he believes that the use of ratio analysis is such an effective tool to evaluate the company’s finance, and to predict its future financial state. Ratios are simply divided in several categories; these are the profitability, liquidity, efficiency and gearing.

For instance, like with this case study, if you were given 10,000 dollars to invest what financial investments would you choose; for me my decision would be as follows: First, I’d choose to invest in General Motors stock which currently cost on average about $6.25 a share, and the current quarterly dividend is rounding up to just over 0.37; or about $1.50 yearly. “Thus, growing in profits with ending results in today’s stock market reaching at the end of day at $45.50 -0.46 – 1.01 %, and after hours at $45.50 0.35 0.78% with an ending volume at 71,447, accordingly, up since the

Fundamental Analysis identifies undervalued or overvalued stocks based on publicly available financial information. It is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. Its goal is to derive a forecast and profit from future price movements.

Schoneburg (1990) pointed out that the performance of a neural network is very sensitive to its

Financial analysis is done by using financial statements of a company to analyze its financial position and performance, and to assess its future financial performance. It thus shows how items in the company’s financial statements relate to its financial performance objectives. (Principles of Accounting, Needles et al, 12th Addition)