Question

Which attribute would one look at to determine a stock's fundamental value?

Competitors

Revenue and profit margin

Company management

All of the above

Which "red flag" could deter a stock purchase?

Company earnings are average and cash flow is weak

A company has announced, but not delivered an innovative product

A company has a little competition in a small market

A company has top-rated management

What should determine an actual profit?

Extraordinary events

Net income

Total operating results and consistent net income

Material losses verses revenue

Which factor determines a company's long-term viability?

Concentrating sales on a small customer base

Selling everything on company credit

Developing products slowly

Ensuring excellent cash flow

Answer 1

1) Correct answer is all of the above.

Attribute would one look at to determine a stock's fundamental value-

• Competitors
• Revenue and profit margin
• Company management

Fundamental analysis is based on the premise that in long run the true or fair value of equity share is equal to its intrinsic value. The intrinsic value of a share is the present value of all future cash inflows from the share. Therefore, fundamental analysis involves analysis of all possible factors that effect the profitability of a company.

There are two approaches to fundamental analysis-

---> Top down approach - In this analysts forecasts the economy first, then the industries and finally the companies.

---> Bottom up approach - In this analysts forecasts the companies first , then the industries and finally the economy.

For determining stocks fundamental values, many factors are taken in to consideration as those factors impact the profitability of the company.

- A firm's profit are effected by the competitors, company's management and revenue, hence these factors are taken into consideration for doing fundamental analysis.

Hope it helps!