Fundamental analysis is the cornerstone of investing. In fact all types of investing comprise studying some fundamentals. The subject of fundamental analysis is also very vast. However, the most important part of fundamental analysis involves delving into 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 information to gain an insight into a company’s future performance.

Fundamental analysis consists of a systemtatic 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 industry and the companies that are a part of the sector

• Situational analysis of a company

• Financial analysis of the company

• Valuation

The previous NCFM module3 focused on macroeconomic and industry analysis, we would examine company analysis (financials) and valuation in this module.