The Stock Exchange: The Theory of Investing - Assignment Example

 The Stock Exchange: The Theory of Investing Introduction Evidently, in the world of business, the stock exchange to be precise, the theory of investing is commonly used. On that note, it is essential to engage in a business venture in which the profits are generated. Therefore, it is worth noting that in the instance of monitoring the appropriate stock exchange to invest in it is critical that one monitors the profits generated or associated with the particular stock market. However, this paper delves to give a decisive insight into seven companies, in simple terms, the company A, B, C, D, E, F and G through the study and evaluation of their financials with the aim boosting the business profits of the company. In addition to that, the paper is also tasked with the role of documenting the methods that can be used in the analysis of stocks for instance the fundamental and the technical analysis methods. However, in this case, we are required to employ the two methods in the determination of the stock value of the companies listed above and consequently, aid in the showing which of the seven companies is the most suitable to invest in. Apparently, fundamental analysis entails a mode of evaluating the securities of a stock by attempting to the intrinsic value of the particular stock. On the same point, it is worth noting that, fundamental analyst delve to study everything in the economy with the aim of determining the financial and industrial condition of a particular industrial venture. On the contrary, the other form of analysis of the stock market is the technical analysis of the market .Apparently, this form of analysis involves the evaluation of the market securities by means of studying statistics generated by the market activity for instance the prices of commodities among the other factors. Evidently, the fundamental analysis is characterized by the following attributes. On the same note, earnings, liabilities, expenses and the assets are some of the important characteristics that serve to distinguish the technical analysis from the fundamental analysis. Apparently, fundamental analysis serves to give a detailed account into the performance of a company through the balance sheets, income statements and monitoring the cash flows of the company. On that note, fundamental analysis of the stock market serves to better the quality of business since it studies the market in relation to the stock thus serves to improve the performance of the particular in the market and thus serves to boost the profit margins. On the other hand, it is evident that the fundamental analysis serves as the vital anchor of the investing market in the business enterprise In addition to that, through the study of the balance sheet of a company which is basically a documented draft of the various assets in relation to the expenditure of the company, we are able get a brief account of the funds in a particular company .Furthermore, fundamental analysis serves to give a detailed cash flow statement which helps in the managing of funds of the company thus fundamental analysis serves to promote financial management in the business world. Moreover, the fundamental analysis promotes the qualitative analysis of the company. Notably, this is the breakdown of the intangible and difficult attributes of the company that posed a challenge during their measurement. Essentially, fundamental analysis has served to create a competitive business environment with the aim of boosting the business sector as a whole. In contradiction, technical analysis entails the study of the patterns of a company’s stocks prices. Evidently, it is possible to deduce a lot about a particular company through the study of their stocks, thus theirs is the need to manage them appropriately with the aim of attracting investors. On the same note, a basic technical analysis was carried out on the companies listed and the result of the stock prices was documented. Notably, the data was tabulated for the ease of analysis. Essentially, the price at the end of the day is entitled the close, thus the close as used in the table is used to refer to this particular variable in the analysis of the companies. In addition to that, the prices marked by the Quote #1 are used to refer to the oldest listed quote for the trading stock. Moreover, the table marked by the Quote#2 is used to refer to second oldest quote from the recently trading stock. It is worth noting that the last record inn this particular table is the most recent closing market quote for the stock. Consequently, through the study of the close and the quotes of the seven companies reveals that there is stiff competition in the stock exchange market. However, with the study of the income for instance the net income, the assets of the companies reveals huge discrepancies between the companies. On that note, it is evident that the company B, C and E have the largest amount of assets respectively. However, this does not hold in the calculation of the net income since it is evident that the companies with least amount of assets are the ones with the highest net income values. On that note, it is therefore critical to monitor and investigate the financial and the business operation of a company with the aid of the fundamental and the technical analysis methods in a bid to establish the most suitable company to invest in. therefore, in this particular case it is worth noting that the company with the likelihood to attract investors is the company F since it has recorded the highest income value as compared to the other companies. On the contrary, the fluctuation in the stick price on a daily basis is at times referred to as the noise in the data. In addition to that, the figure illustrated in the articles provides show the twenty days of the stock prices for the companies. Notably, the fluctuations in the data are highlighted in the charts. On that note, this is aimed at establishing the variations in the stock market prices and thus giving a deduction of the mast suitable company to invest in. Furthermore, fundamental analysis of these seven companies reveals the financial situation of the companies. On the same note, the fundamental analysis uses the balance sheet and the income statements of the companies with the aim of assessing the current stock value which may be different with the market stock figures. Evidently, the net income in the fundamental analysis can be defined as the difference between the revenues and the expenditure of the company. Apparently, the income statement documents the data f that may span for three of two years thus is a means for the storage of information for future reference. On that note, the fundamental ratio is said to be return on sales, in other words, this can be described as the ratio of the net income to revenue. Notably, the higher the return on sales value the better the performance of the company. Evidently, the ratios of the current and the previous year are usually compared and an increase in the value would suggest an improvement in the business since profits can be generated. On that note, form the data provided about the seven companies, all of them recorded an increase in the ratio thus improvement in the business. However, the margin of improvement of the company F suggests that it is the most suitable company to invest in since it recorded the highest improvement margin of this particular ratio. Moreover, the balance sheet of a company also highlight the productive assets held by the company, liabilities and the company’s stockbroker equity which is equivalent to the assets less the liabilities. Evidently, the fundamental ratio, in other words, the returns on assets which is simply the ration of the net income to the total assets of the company. Apparently, the higher this ratio, suggests that the business in the stock is improving thus the profit margins are also increasing. Notably, the ratio of the previous years is usually compared to the current year and a increase in the value usually suggest that the company is generating income thus the financial status of the company is also rising. Consequently, after the determination of the return on the assets and the return on sales of the seven companies, we are able to establish that company E, is the most suitable company for the investing in the stock market since it recorded the highest variation margins as compared to the previous year as compared to the other six companies. In conclusion, it is evident that the stock exchange market is a profitable business venture among companies if the appropriate strategies are put in place. On that note, this fact is clear from the study of the seven companies in the above section of this paper. To this end, it is critical to analyse a company using the appropriate method, that is, fundamental and the technical analysis before investing or buying stock into a company. Reference  Schwager, J. D. Fundamental analysis. New York:1995 Wiley. Read More