What is fundamental analysis? Hopefully you already know it has something to do with investing. Fundamental analysis is a way to analyze stocks. Would you just take a job without looking into it such as if it offers benefits, if you're required to work over-time, what the working conditions are, or even how much it pays? Your jobs biggest or maybe even sole purpose is to make you money, but you want it to work well with your life so that you don't end up quitting and having no money. When investing in stocks, you want to do the same thing. The sole purpose of buying stock is to make money, but if you don't do your research beforehand, you might end up losing money.
The fundamentals of a corporation are top priority when looking into a stock, unless you are using technical analysis which mainly uses charts. First, you should look at the financial statements of a corporation. If you don't have a degree in accounting or finance it's likely you don't know what financial statements are. Financial statements are exactly what they sound like, they are the statements that describe the corporation's financial statements. These include the Balance Sheet, Income Statement, Retained Earnings Statement, and Cash Flows Statement. It's important to be able to reads these. Get a good investing book that will teach you what these mean.
These financial statements will tell you what the corporation owns in assets, how much money they owe, how much money is owed to them, how liquid they are, how they are doing in terms of cash, where there money goes, and more financial information. Again, if this sounds confusing, click through the link below to find out more. Analysis of financial statements is an important step in fundamental analysis.
It's also important to look at management. What is the history of the CEO and other management authority? Do they look promising? Have they made many good growth-related decisions in the past? The managers of a corporation can make or break a company and you need to know they are going in the right direction.
Overall, you need to look at a company and decide if what they've done in the past will predict what they will do in the future and if they are a potential candidate for growth. Look at their past dividend history. If they pay well and often, they are perfect for the dividend seeking investor. Look at the price to earnings ration, their cash flow, and how much debt they have. A little bit of research and thought can go a long way.
