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Fundamental Analysis Assignment

Fundamental analysis of a business involves analyzing its financial statements and health. When applied to futures and forex, it focuses on the overall state of the economy. Security analysts operate in three arenas, each reflecting a different set of goals and objectives.

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2K views

Fundamental Analysis Assignment

Fundamental analysis of a business involves analyzing its financial statements and health. When applied to futures and forex, it focuses on the overall state of the economy. Security analysts operate in three arenas, each reflecting a different set of goals and objectives.

Uploaded by

ayushmanepal
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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5 ) What is the benefit in analyzing the market and alternative industries before individual securities?

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors andmarkets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.[1] The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible benefits to analyze the market: to conduct a company stock valuation and predict its probable price evolution, to make a projection on its business performance, to evaluate its management and make internal business decisions, to calculate its credit risk.

A security is a financial asset representing a claim on the assets of the issuing firm and on the profits produced by the assets. The term security analysis pertains to the process of identifying desirable investment opportunities in such financial assets. In the case of corporate stocks and bonds, the analysis flows from the interpretation of accounting and financial data regarding operations, profitability, net worth, and the like. Investment alternatives are identified based on (1) the investor's risk/reward ratio, (2) a specified time horizon, and (3) current market prices. Security analysts, in essence, are the catalysts which drive the efficient market hypothesis. That is, "smart" money will logically and efficiently distribute itself in such a way that security prices reflect all available information. As new information becomes available, analysts assess it and recommend market price adjustments according to changes they anticipate for price levels. The cumulative impact of price adjustments moves the market to equilibrium so that the price of any security approximates true investment value. Security analysts operate in three arenas, each reflecting a different set of goals and objectives. Investment banking and brokerage firms represent the "sell" side of security analysis. Their clients are fee and commission paying institutional and individual investors. Investment management organizations conduct security analysis for the portfolios they manage. Since portfolio managers purchase securities, they represent the "buy" side of the street.

Finally, a number of investment publishing services provide security analysis for all investors subscribing to their reports. 7) Is there a difference between the returns for alternative industries during specific time periods and what is the implication of this result? Almost no association in individual industry performance year to year or over sequential rising or falling markets. Variables that affect industry performance change over time. Although risk measures for different industries have shown substantial dispersion during a period of time, individual industries risk measures are stable over time. This assessment helps us interpret the result of subsequent industry valuation. 8) Is there consistency in the returns for industries overtime and what do these results imply regarding industry analysis+

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