What is Profit&Loss (P&L) Statement ?

Definition : Also known as Income statement, is a financial statement which shows expenses and revenue of a company during a particular period, usually a fiscal quarter or year.
Read : What Is Balance Sheet ?
Income Statement helps to convey the status of a company i.e. Company is making profit or suffering losses. It is very important to read Income Statement of a company before investing, both of recent and past years.
Note : Revenue : Total amount received from sales of goods and services. Expenses : Total amount spend in producing final product or service.
Structure of P&L Statement  Income Statement is divided into Five main section - Net sales, Cost of Goods Sold, Gross Margin, Operating Expenses and Net Profit Before & After Income Tax (Or Net Loss in case of Loss).
Net Sales : It is the sum of Gross sales excluding its returns, allowances and discounts.Cost Of Goods Sold : Amount of money used to produce the final product. For example cost of inventory, merchandise purchased…

Stock Analysis - Technical And Fundamental

Stock analysis is the detailed examination of a company or stock. It is the process of obtaining deep knowledge of business, product, accounting, market reputation, management, etc. of the company. Analysis is a very important part of investment as it gives you the idea on future value of the stock. What are plans made by the management to grow the business and what products the company is planning to launch in future will help you to understand how will the company perform in future and based on your research you will be able to take right decisions for you investments. 

There are basically two types of Stock analysis :

Technical Analysis

It is defined as the study of price movement charts of a stock. Deeply analysing the past price movement of a stock to predict its future price movement to generate profit. It is very helpful in trading (buy and hold for short-term) but too risky for Investing. Trader use technical analysis to generate short term profits using their skill and luck. Luck is very important part for traders, as technical analysis does not provide any fundamental or accounting details, it is totally based on price and volume of a stock. Trader invest with a hope that stock will perform in past manner in coming days also. There is no factor or even warren buffet cannot predict the accurate movement of a stock price. But Fundamental analysis can be used to predict the long term performance of a stock by deeply analysing its business and fundamentals.

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Fundamental Analysis 

It is the art of evaluating or examining past and present value of a stock to predict its future performance by deeply analysing various fundamentals of a company such as future plans, financial statement, health, competitors, competitive advantage, product, etc. In simple words, fundamental analysis is used by investors to predict future value of a stock by examining its historical and current data. It focuses on both qualitative and quantitative data of the company for e.g. production, earnings, GDP, employment, management, etc. How much profit a company made in recent years and how much it is capable to make consistent future growth is very important to understand before making long term investments. Fundamental analysis is widely used in Investing (buy or hold for long term). Intelligent or value investors never invest without proper fundamental analysis, they always look for capability in a business and its management. It is also very important to understand financial ratios of the company for fundamental analysis as it helps you to understand profitability of a company and also stock is price is reasonable or not. Some key financial ratios are EPS, P/E ratio, Dividend yield, P/B ratio, D/E ratio, etc.

Check out : Top 15 Penny Stocks

Always remember, to gain multibagger profit you need to understand company's business and its fundamentals. You cannot become a millionaire by trading as you will not get success every time. And if you are a beginner i will strictly suggest you to stay away from trading and invest your time in gaining knowledge and then put your money in valuable stock having good fundamentals. 


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