Earning Online from Panama

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What is fundamental analysis? Hopefully you already know it has something to do with investing. Fundamental analysis is a way to analyze stocks.

You wouldn’t take a job without first finding out the pay, benefits, if you need to work overtime, or what the working conditions are like, right? The reason why you get a job is to make money, but that doesn’t mean you should work somewhere that you won’t be happy.

When investing in stocks, you want to do the same thing. The sole purpose of buying stock is to make money, but if you don’t do your research beforehand, you might end up losing money.

Technical analysis focuses on researching stocks using charts, whereas fundamental analysis looks into the fundamentals of a corporation. Let’s start by discussing financial statements. Chances are, unless you are an accounting or have taken business classes, you probably don’t know what financial statements are.

A financial statement is a statement that lists the specifics of a companies money situation. There are 4 separate financial statements that a corporation has available which include the Income Statement, Balance Sheet, Retained Earnings Statement, and Cash Flows Statement. You should be able to read and understand these before you begin investing.

A financial statement can tell a lot about a company. The balance sheet shows how much they own and how much debt they have. The income statement tells how much money they made in the past year. The retained earnings statement shows how much money they are retaining in the business, and the statement of cash flows details where they are spending their cash on and where it is coming from.

Management is another top priority when using fundamental analysis. You should read the annual reports of the company and read about what the management has to say about the direction the company is going in. What has management done in the past and how do you think it will affect the future? Do they have a promising future?

Overall, you need to look at a company and decide if what they’ve done in the past will predict what they will do in the future and if they are a potential candidate for growth. Look at their past dividend history. If they pay well and often, they are perfect for the dividend seeking investor. Look at the price to earnings ration, their cash flow, and how much debt they have. A little bit of research and thought can go a long way.