Basic concepts and guiding principles of fundamental analysis


Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and
companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level,
fundamental analysis may involve examination of financial data, management, business concept and competition.

At the industry level, there might be an examination of supply and demand forces for the products offered. For the national
economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast
future stock, commodity or currency prices,fundamental analysis combines economic, industry, and company analysis to derive a
financial instrument’s current fair value and forecast future value. In general, fundamental analysis explores the impact of social, political and economic forces on the price of financial instruments.