Introduction to FA

• Fundamental analysis is a method of determining a stock’s real or fair market value.

Fundamantal Analysis types

• FA is mainly of two types
  • Qualitative –> Non-numeric aspects
  • Quantitative –> Number-crunching

Qualitative analysis

• It refers to non-numeric aspects of the company
• Analysis of Management, Corporate-governance and business-model
• Management
  • Background of Management
  • Promoter lifestyle
  • Significant shareholders
  • Minority shareholders
  • Shareholding
• Corporate Governance
  • The company should run ethically, fairly, transparently, and efficiently
• Business model
  • Business ethics
  • Business moats

Quantitative analysis

• It emphasizes on mathematical and statistical aspects of the company.
• Analysis of company numbers(number-crunching)
• It includes analysis of:
  • Balance Sheet
  • Profit & Loss
  • Financial Ratio
  • Cash Flow
  • Industry/Sector analysis

Fundamental Analysis Approach

• It can be done in two ways
  • Top Down: Economy –> Industry –> Company
  • Botton Up: Company –> Industry –> Economy

Economy Analysis

• GDP
• Balance of Payments (Import Export)
  • Export > Import –> Surplus BOP
  • Export < Import –> Deficit BOP

Industry Analysis

• Like Good manifesto of Govt to Electrify country
• Will boost Power section
  • Generation
  • Transmission
  • Distribution

Company Analysis

• Qualitative Analysis + Quantitative Analysis
• Company overview
• Business Segment
• Performance, Growth outlook
• SWOT analysis
  • strengths, weaknesses, opportunities, and threats

Financial Statement(FS)

• FS may have Standalone and Consolidate Statement
• Standlone FS
  • FS of all the Branches of the Company added together
• Consolidate FS
  • StandAlone FS + Subsidiary FS + Associates FS + Join Venture FS
• Company types included in FS
  • Subsidiary Company
    • Company X holding more than 50% of other company Y,
    • then Y is subsidary company of X
  • Associate Company
    • Company X has 20% <= holding <= 50% in other company Y,
    • then Y is Associate company of X
  • Join Venture
    • Two to more Companies working together for sometime.
  • No Name
    • if has less than 20% holdings
    • Not included in FS
  • In Above example:
    • X –> term as Parent/Holding Company and
    • Y –> term as Subsidary or Associates or Join Venture

Business Type (Share Holdings Pattern)

• Family Owned Business
  • Promoter Holdings will be Highest
  • Eg: Reliance
  • In this type of business Promoter should have more Holdings
• Professionally run business
  • Promoter Holdings will be Lowest
  • Eg: L&T, ITC
  • In this type of business Promoter may have less or Zero Holding

Basics Of Fundamental Analysis Lecture 1 P1 by CA Rachana Phadke Ranade

Profit & Loss, Balance Sheet | Basics Of Fundamental Analysis Lecture 1 P2 By Rachana Phadke Ranade

Economy And Industry Analysis | Basics Of Fundamental Analysis lecture 1 P3 By Rachana Phadke Ranade