This article owes to my friend who asked me something related to fundamental analysis so here i decided to write a complete article on this. I am also quoting my reply given to him which i feel may help a lot of people having similar doubts.
here i am assuming one is familiar to stock markets and had been involved in trading or investing in markets directly or indirectly.
Fundamental analysis is looking at a business at the basic or fundamental financial level, which means you do analysis and comparison between companies operating in same sectors before you pinpoint on a particular company to park your hard earned money.
Now we come back to how it is done and why it is done, the answer for why it is done is quite simple, wont you like to make smart decision so you can invest wisely with proper information and most importantly with knowing what you are doing so that whatever decisions you take is based on some concrete analysis of data and you yourself are convinced to make an entry into companies list of shareholders to attain the satisfaction and peace of mind knowing.
So now we are left to find an answer to how it is done, one of the most important ways is by using the known financial ratios like:
Earnings per Share – EPS
Price to Earnings Ratio – P/E
Dividend Payout Ratio
Dividend Yield
Book Value per share
Projected Earning Growth – PEG
Price to Sales – P/S
Price to Book – P/B
Return on Equity – ROE or Return on capital employed – ROCE
to get an overview on what these ratios stands for you can use Google or jump to http://niftystrategy.com/knowledge-center/ and if you are left with any doubt you can also ask here.
For fundamental analysis I have one more thing to share, I feel the fundamental analysis is very subjective thing because of lots of factors, one example I’ll give you to make you understand what i am saying is;
one of the most important part of fundamental analysis is “history or background of promoter” in short “who is the promoter” because we really don’t want to invest in a company run by Mr. Ramalinga raju 
so tell me is there any possible ratio or financial statement or for that matter software, which can tell the difference between narayan murthy and deepak parekh or can compare them with scamster like Raju. So there are many ways to do the job of fundamental analysis but i do feel one can get the hang of it only after he/she had been involved in stock market for a while, these things come with experience. As you keep researching about different aspects you will eventually learn and you will get your answers related to fundamental analysis.
Thanks everyone, share and discuss more to learn more.
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Thanks