Fundamental Analysis - Simplified Manual - MR Gennaro Cuofano Mba

By looking at the main financial statements (Balance Sheet and Income Statement), you won't be able to find any answer unless you ask the right questions. Although the financial statements give you already a great deal of information about the business, there is still something missing. In this manual, we are going to see how to read and interpret the main financial statements through ratio analysis, comparative analysis and DuPont analysis. Fundamental analysis is usually defined as the ability to understand the intrinsic value of a business by looking at the business financial statements. Let's use an analogy here: Imagine for a second to be a car flipper. In short, you make money by sensing cars that have a great potential. One day you are walking in your town and you see a car that seems to be abandoned. This car form the outside looks very scrappy. You call up the owner to see if he wants to sell it. To your surprise the owner wants to sell it for $500. He needs money and want to cash out. The car from the outside seems to be in very bad conditions. Yet you are an expert about engines and you know that the real value is not the outside but the inside of the car. Thus, you open the hood and to your amazement the engine is in perfect conditions. The deal is done. You pay the owner and go back to work Why are you so happy? You are ecstatic because the car you just bought is a 1965 Buick Riviera GS! After a month of repairing you spent $4,000 to fix it up. Your total expense to flip the car is $5,000. On the other hand, you sell the car for over $20K! This means that you generated a 400% return in a month of work! Why was this deal so successful? Because you managed to see the intrinsic value of the car where others didn't actually see it. Thus, even though Ratio Analysis is a very simple tool it is also very effective. In this manual you will be shown why.