Module 2: Fundamental Analysis (The Basics of Company Research)

Question 1

Question: What is Fundamental Analysis?

Answer 1

Answer: Fundamental analysis is the process of evaluating a company’s financial health, earnings, and market position to determine if it’s a good investment.

Question 2

Question: What are key financial statements investors analyze?

Answer 2

Answer: The three key financial statements investors analyze are:

Balance Sheet: Shows a company’s assets, liabilities, and shareholders’ equity.

Income Statement: Details a company’s revenue, expenses, and profit over a specific period.

Cash Flow Statement: Tracks the cash inflows and outflows, showing how well a company manages its cash.

Question 3

Question: What is the P/E Ratio, and why is it important?

Answer 3

Answer: The Price-to-Earnings (P/E) ratio compares a stock’s price to its earnings per share, helping investors determine if a stock is over or undervalued.

Question 4

Question: What is EPS (Earnings Per Share)?

Answer 4

Answer: EPS measures a company’s profitability by dividing net income by the number of outstanding shares.

Question 5

Question: What is the Debt-to-Equity Ratio?

Answer 5

Answer: It measures a company’s financial leverage by comparing its total liabilities to shareholders’ equity.