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Fundamental Analysis > Fundamental Analysis Basics > Flashcards

Fundamental Analysis Basics Flashcards

1
Q

What does a fundamental analyst examine?

A
  • Industry outlook
  • Management of company
  • Product lines
  • New products
  • Market share
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2
Q

What are the 3 FS that a fund. analyst examines?

A
  • BS
  • IS
  • Statement of changes in Retained Earnings
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3
Q

How are assets and liabilities order on the BS?

A

In order of liquidity (top to bottom

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4
Q

What is the current ratio?

A

Current assets / current liabilities

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5
Q

What is the acid test ratio? (Quick ratio)

A

Current assets less inventory / current liabilities

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6
Q

What is the AR turnover ratio?

A

Annual sales / YE AR

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7
Q

What is the AR Turnover in Days?

A

360 days / turnover ratio

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8
Q

What is the inventory turnover ratio?

A

Annual COGS / YE Inventory

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9
Q

During rising periods of inflation, which accounting method results in the highest reported profit?

A

FIFO

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10
Q

During periods of deflation, which inventory method results in the highest net profit?

A

LIFO

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11
Q

What is the capitalization ratio used for?

A

To evaluates a company’s capital structure; i.e if it is highly leveraged, etc

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12
Q

What is the formula to compute long term capital?

A

Long Term Debt + Preferred stock + Common Equity

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13
Q

What is the formula to compute common equity?

A

Capital at par + capital in excess of par + retained earnings

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14
Q

What is the bond ratio formula?

A

Long term debt / total long term capital

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15
Q

What is the preferred stock ratio?

A

Preferred stock / Total long term capital

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16
Q

What is the common stock ratio?

A

Capital at Par + Cap. in excess of par + RE / Total LT cap

17
Q

What is the formula for book value per common share?

A

Common equity - intangibles / # of common shares outstanding

18
Q

What is the net tangible asset value per bond formula?

A

Tangible assets - current liab. / # of 1,000 par bonds out

19
Q

What is used to determine if a stock is over or under-valued?

A

Net tangible asset value per common

20
Q

What is the formula for gross margin?

A

Net sales - COGS

21
Q

When is bond interest expense paid?

A

after all operating expenses are covered

22
Q

What does the latter half of the IS look like?

A 
Total income
- Bond interest expense
-----------------------------
Net income before tax
- Taxes
--------------------------
NI after taxes
- Extraordinary items
23
Q

What are the four ratios used to measure profitability from the income statement?

A
  1. Operating margin of profit
  2. Bond interest coverage ratio
  3. Net profit ratio
  4. ROA ratio
24
Q

What is the formula for Operating margin of profit?

A

Operating profit / net sales

25
Q

What is the formula for the bond interest coverage rati?

A

Total operation + non-operating income / bond int. exp

26
Q

What is the net profit ratio?

A

Net income after tax / net sales

27
Q

What is the ROA ratio?

A

Net income after tax / total tangible assets

28
Q

What is included on the statement of retained earnings?

A

EP Common share
ROCE
Dividend payout ratio
Diluted EPS

29
Q

What is the EP common share formula?

A

Earnings available for common / # of common sh. out.

30
Q

What is the ROCE formula?

A

Earnings available for common / Common equity

31
Q

What is the dividend payout ratio?

A

Common dividends paid / Earnings avail. for common

32
Q

What does a low and high dividend payout ratio mean, respectively?

A

Low ratio = growth company

High rartio = mature company or utility or co.

33
Q

Where are stock dividends “paid” from?

A

Retained earnings

34
Q

What happens in a stock dividend?

A

A distribution of less than 25% is made. There is NO DOLLAR CHANGE in Stockholder’s equity

35
Q

What happens in a stock split

A

This is treated as an adjustment to par value. The stockholder’s equity stays THE SAME

36
Q

What are some sources of information on individual stocks?

A
  • S and P
  • Value line (1,700 stocks rate 1-5, 1 is the best rating)
  • Member firm in house research

Others:

  • Moody (though mainly a BOND rating firm)
  • Morningstar (though mainly for mutual funds)

Fundamental Analysis (2 decks)

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