Fundamentals are the financial and economic situation of a company. Both business owners and investors are analyzing the company's fundamentals when they look at things such as cash flow, balance sheet, income statement, as well as the company's management. With fundamental analysis, business owners and investors can evaluate a company's health, areas of risk, and growth potential. It is just as valid to apply such analysis to personal finance as well as corporate finance.
Although fundamentals are most often associated with businesses, fundamentals also apply to currencies, whose value is tied to the health and prospects of the currency's country. A country's economics such as interest rates, trade balance, inflation, and interest rates can be considered the currency's fundamentals.
How Investors use Fundamentals
Fundamentals are qualitative and quantitative information that contributes to the economic well-being and the subsequent financial valuation of a company, security or currency. Analysts and investors analyze these fundamentals to develop an estimate as to whether the underlying asset is considered a worthwhile investment.
For businesses, information such as revenue, earnings, assets, liabilities and growth are considered some of the fundamentals.
EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization),
Operating Cash Flow,
Book Value per Share,
Revenue Per Share,
Return on Equity (ROE),
Return on Assets,
Price-to-Earnings to Growth (PEG) Ratio,
Forward Price-to-Earnings (P/E) Ratio,
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