Chapter 16: Fundamental Analysis

Chapter summary

Chapter 16 covers fundamental analysis: how to read financial statements and calculate key ratios. EPS = net income ÷ shares outstanding. P/E = price ÷ EPS. Current ratio = current assets ÷ current liabilities; quick ratio excludes inventory. Debt-to-equity measures leverage. Working capital = current assets − current liabilities. These ratios help assess profitability, liquidity, and leverage — the foundation of individual security analysis.

Key concepts

• Fundamental Analysis
• Analyzing Financial Statements
• Analyzing Financial Statements
• Identify the components of the balance sheet: current assets, long-te...
• Calculate working capital = current assets - current liabilities; ide...
• Identify the income statement components: revenue, cost of goods sold...
• The Balance Sheet
• Components of the Balance Sheet-Assets
• The Liabilities Section

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