Learning Center Series : Part1

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.