Fundamental Analysis

Measured in terms of revenues, earnings, assets and liabilities, the fundamentals show the economic health of a company. There is also the return on Assets, on Equity, on Investments and cash flow that will tell you a lot about how a company is doing financially.

If it is generating a profit, has limited debts, growing at a good pace and has abundant cash, then it is known as having robust fundamentals. To analyze the fundamental of a company, you need to do more than just view the everyday movement in its share price. As a way to calculate the value of a stock of a company, equity researchers will do an analysis of the fundamentals.

There are a few fundamental components and one is the revenues, which is the money the company receives through its sales.  There are also cash flows which are the cash payments over a certain amount of time and net income, commonly known as the bottom line. There is the balance sheet which is the financial statement of the company and will show the assets and liabilities.  Return on assets or the ROA, shows you the profitability of the company and is the most important component of a company that investors will look at first when they are looking for a good stock to invest in.