Finance 3310 Lamar University
the functions of financial analysis
1)describe economy, industry, and company 2)selective (valuation) 3)critical
forces of financial and economic analysis in macro level
1)domestic and international 2)financial 3)economic 4)social 5)political factors
basis for forming stock market sectors are
1)financial 2)economic 3)fundamental 4)return characteristics
3 principle steps in valuing the stock market
1)forecasting earnings 2)estimate dividend payout ratio 3)selecting a capitalization rate
industry analysis takes into account
1)industry growth rates 2)share of industry in GDP
key economic and financial indicators
1)inflation 2)GDP 3)unemployment rate 4)interest rate 5)balance of trade 6)exchange rates
"top down" fundamental analysis
1)macro economic analysis 2)capital market analysis 3)sector analysis 4)industry analysis 5)business or company
2 objectives of financial analysis
1)present important facts regarding the company to an investor 2)reach conclusions based on the facts and attractiveness of the business
2 elements (info) entering into financial analysis
1)quantitative data 2)qualitative info
economic forecasts are essential for:
1)stock and bond market 2)industry and company projections
in capital market analysis investor looks for info related to:
1)value 2)return from stock and bond market
main questions of financial analysis
1)what info should be used for analysis 2)where to find that information 3)what techniques and methods to use to do financial analysis
GDP
C+I+G+NX monetary value of all the finished goods and services produced in a country in a specific time
fundamental analysis
a careful study of available facts to understand and draw conclusions based on established principles and logic
return differentials in the capital markets are determined by:
a continuous tradeoff between risk and return
sectors consist of:
a major grouping of stocks
in administering the capital of an investment fund the standard approach consists of:
allocating the equity to a number of industries excluding those that are unattractive and dividing the holding among best industries and companies
Competition and industry performance investments should base his/her decisions on:
analysis
sector analysis is used to identify
attractive areas of investments
market analysis concept
everything in the stock market is known and prices are rational
principal question of financial and economic analysis in the macro level
how sensitive is the firm to the economic environment both international and domestic
investment type purchases
investments are made on basis of careful studies by trained analysts
main purpose of sector analysis
is to improve diversification and find undervalued stocks
sector and industry analysis is not an independent type of analysis
it is a bridge between capital market and company analysis
quantitative data
structural and statistical
selecting best industries and securities can ensure:
successful investment, profitability
objective of comparative analysis is:
to rank and compare industries or firms in proportion of their attractiveness
investment conclusions may be reached:
trying to analyze and understand the future of industry based on financial analysis
qualitative info
unstructured and subjective nature of business, a position of the co. industry, physical, geographical, and operating characteristics, character of management, long-term outlook. things that are impossible to quantify
