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FA 1
KEY ECONOMIC INDICATORS
LEADING INDICATORS: Predict what is likely to
happen in economy.
Eg. Agricultural production
Corporate profits
Money supply
Credit position etc.
COINCIDENTAL INDICATORS : Highlights the current
position of the economy
Eg. GDP
Interest rates
Money market rates
Reserve bank funds etc.
LAGGING INDICATORS: Explains what has already
taken place.
Eg. Large scale unemployment
Outstanding debt
Past interest rates of commercial banks etc.
INDUSTRY ANALYSIS
FA 2
LIFE CYCLE OF AN INDUSTRY
PIONEERING STAGE
EXPANSION STAGE
STAGNATION STAGE
DECLINING STAGE
INVEST: ?
DISINVEST: ?
SWOT ANALYSIS
SOME ISSUES TO BE ADDRESSED:
1. Are the sales of the industry growing or stagnant?
2. Overall ROI of the industry.
3. What are the important cost component of the
industry and its impact on the performance/
4. Is the industry dominated by one or two major
companies? No. of domestic and multinational players.
5. Impact of taxation – direct or indirect taxes.
6. Is the industry highly competitive?
7. Is the industry fully exploited? Etc.
MARKET STRUCTURE
Absolute monopoly
Imperfect competition
Perfect competition
Competitive Forces And Industry
Profitability
Michael Porter 5- Force Analysis:
1. Treat of new entrants.
2. Threat of substitutes.
3. The bargaining power of the buyers
4. The bargaining power of suppliers
5. The rivalry among the existing players.
COMPANY ANALYSIS: PART I
FA 3
GENERAL ANALYSIS
NON-FINANCIAL ANALYSIS:
ASPECTS-
1. History/ promoters and management
2. Technology / foreign collaborations/ Economies of
scale etc.
3. Product range/ marketing/ selling & distribution
4. Industry relations/ productivity etc.
5. Environment
INVESTORS & SWOT ANALYSIS
More opp.
CHAOTIC HIGH INVESTMENT
& less threats
Balanced opp.
& threats
MEDIUM INVESTMENT SITUATION
FINANCIAL ANALYSIS : FA 3
RATIOS FOR COMPANY ANALYSIS
EARNINGS & DIVIDEND LEVELS
ROE
BV PER SHARE
EPS
DPS
GROWTH PERFORMANCE
CAGR: SALES, EPS, AND DPS
VALUATION MULTIPLES
PRICE TO EARNINGS RATIO
be manipulated.
Since this is an accounting measure, it also acts as a
conservative estimate – comparing the price of the
share to the book value of its equity – which is less
distorted on the upside than the market value.
VALUE MULTIPLES
Value of Debt
Enterprise Value = Market Value of Equity +