In this post I am going to give you information about Fundamental Analysis.
Fundamental analysis are in three part:—
• Value Investing- You have to invest when the price value is less then it's insentric value. If the price value is more then it's insentric value then don't invest.
• Ratio- 1. PE Ratio (Price to Earning ratio)—> In simple language if PE Ratio of any company is ₹10 (for example) then it means you have to pay ₹10 to earn ₹1.
★ PE ratio can be negative
★ If PE ratio is closer to 1 it's good although if it is less then 20 then it is also good
2. PB Ratio (Price to Book ratio)—> It means if you have to sell that company right now then how much you get at that time.
★ PB Ratio is always positive
★ If PB Ratio is low then it's good
3. Debt to Equity ratio (D to E ratio)—> If the D to E ratio is 5 then, it means company has taken loan 5X as compared to equity.
★ Most of the people think that D to E ratio is bad but it is not alwa bad. If a company has taken loan then it also matters that what is the repaying capacity of that company. If it's repaying capacity is good then there is no problem to invest in that company.
★ Although lesser D to E ratio is good
4. Current Ratio—> It is the Ratio of current assets and current liabilities.
★ Higher Current Ratio is Good
• Balance Sheet—> Things to be notice in balance sheet are-
1. Is the sales of that perticular company increasing?
2. Is that company making profit?
3. Total assets should be increase per year and liabilities should be decrease per year
4. Companies should have cash
5. Assets should always be greater than liabilities.
6. Low Pledge Promote holding
7. Promote holdings should increase
★ There are other things also that matters that we should invest or not:—
• Type of Business
• Current needs of that business
• Is it needful in future?
• Monopoly
• Competitor
★ Rule of 72—> If tell us that after how many years our money will be double
For ex- You have deposited your money in the bank and bank gives you 16% interest on your deposited money, then you have to divide 72/16 and the ans you get is the timeline after which your money get double.
72/16= 4.5 ; it means after 4.5 - 5 yrs your money will be double
If you want to know about BASICS OF STOCK MARKET(PART-1) then click on this link or copy it and paste it on chrome
Link- https://commerceworldteam.blogspot.com/2024/03/basics-of-stock-market-part-1.html
Thank you so much
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