Analysis Of Fundamental Analysis

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CHAPTER 4 FUNDAMENTAL ANALYSIS Fundamental analysis is the study of economic, industry, and company conditions in an effort to determine the value of a company's stock. Here we look at a business from the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and thus we get a clear idea about the real value of its stock. Fundamental analysis typically focuses on key statistics in a company's financial statements to determine if the stock price is correctly valued. It likewise helps us to foresee the movement of stock prices. Most fundamental information focuses on economic, industry, and company statistics. The typical approach to analysing a company involves four basic steps: 1. Determine the condition of the general economy. 2. Determine the condition of the industry. 3. Determine the condition of the company. 4. Determine the value of the company's stock. ECONOMIC ANALYSIS The economy is studied to figure out whether general conditions are useful for stock market. Is inflation a problem? Are…show more content…
Some of these loans become non-performing assets (NPAs). Banks’ profits start dipping or they may even start making losses, resulting in write-off of capital. At the same time, they are required to make higher loan loss provisions for the non-performing loans and maintain higher capital for the rating down-gradation of their borrowers. With their poor financials, banks do not get external capital to support their existing loan portfolio, and further growth in credit. This results in banks becoming cautious and restricting lending, thereby resulting in the credit contraction risk spilling over to the real sector of the economy which at that time needs credit the most. It may lead to systemic risk which may spiral into economic
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