Dear Readers,
Greetings from Ram Financial Consultancy, we are glad to announce new series of article
"Learning Center" which gives you clear understanding about selecting stocks which can help
you in reducing risk while you are making good returns.
The process of understanding about stock investments involve various steps we will look into them step by step in this series of article. Equity Valuation focuses on analyzing businesses
from valuation and forecasting prospectives. It begins with the analysis of economy, industry
and company (E-I-C). In economic analysis, the performance of macro and micro level is
analyzed to understand the businesses for forecasting and valuation of businesses. Industry
analysis focuses on the factors that make the company competitive and forecasts growth
cycles in the industry. Company analysis begins with understanding the financial statements of
a company and computing ratios, discounted cash flow analysis and dividend discount models
under different assumptions.
Understating of business requires through understand of economy of the country and its various
sectors. Changes in economy have their implications on all business firms either directly or
indirectly. Macroeconomics deal whit aggregate variables of any economy like the output, its
composition and rate of growth, level and growth rates of money supply, employment,
investment, exports, imports, variation in interest rates, inflation rate, government finances,
public borrowing etc.
Primary use of equity research is for making investment decisions whether they are large
institutions, foreign investors, private equity, venture capital, high net worth r retail investors.
High quality research can be a powerful tool for wealth creation as it would enable higher
returns on investments over the long run.
There are two aspects of equity research. Quantitative information including financial
aspects start with financial statements such as profit & loss statements, balance sheet, cash
flow statements, schedules to accounts, etc. Qualitative information involves gaining an insight
on business and industry dynamics and can be obtained through a variety of sources including
all sorts of reading materials on the company and the industry (like news reports about
company recent development activity, broad meetings details etc.)
A business value is based on its future prospective so it is understandable that valuation
models that involves forecasts have considerable importance. A valuation model is usually
expressed as a formula but it reality is a methodical approach to tackle the task of valuation.
In detail about each topic we would like to preset in coming days. if you have any questions feel
free to write us in comments sections.
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Regards,
venkat
Some of the information used in this article is collected from various books and online article we would like to thank each and every author who published those book and article.
