Steps in Fundamental Analysis

Fundamental analysis is an important concept in investing. In fact, all types of investing has to undergo studying some fundamentals. The subject of fundamental analysis is also very vast. However, the most important part of fundamental analysis involves inquiring the financial statements. This involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Fundamental analysts look at these pieces of information to gain an insight into a company’s future performance.

Fundamental analysis consists of a systematic series of steps to examine the investment environment of a company and then identify opportunities. Some of these are:

  • Macroeconomic analysis – which involves analysing capital flows, interest rate cycles, currencies, commodities, indices etc.
  • Industry analysis – which involves the analysis of the industry and the companies that are a part of the sector
    • Situational analysis of a company
    • Financial analysis of the company
    • Valuation
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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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