Editing 1course Stock Market (section)

== Key Components of Fundamental Analysis ==

=== 1. Financial Statements ===
The foundation of fundamental analysis is a company’s financial statements. These include the income statement, balance sheet, and cash flow statement. Each document provides crucial insights into the company’s financial health and performance.

* '''Income Statement:''' Shows the company’s revenues, expenses, and profits over a specific period.
* '''Balance Sheet:''' Provides a snapshot of the company’s assets, liabilities, and shareholders’ equity at a specific point in time.
* '''Cash Flow Statement:''' Details the company’s cash inflows and outflows from operating, investing, and financing activities.

=== Example: Analyzing Apple’s income statement reveals its revenue growth and profitability, while the balance sheet shows its strong cash reserves and manageable debt levels. ===

=== 2. Earnings Per Share (EPS) ===
EPS is a key indicator of a company’s profitability. It’s calculated by dividing the company’s net income by the number of outstanding shares. Higher EPS often indicates better profitability.

=== Example: If a company has a net income of $100 million and 10 million outstanding shares, its EPS is $10. ===

=== 3. Price-to-Earnings (P/E) Ratio ===
The P/E ratio compares a company’s stock price to its earnings per share. It helps determine if a stock is overvalued or undervalued compared to its peers and the overall market.

=== Example: A company with a P/E ratio of 15 is generally considered more attractively valued than a similar company with a P/E ratio of 25, assuming other factors are equal. ===

=== 4. Return on Equity (ROE) ===
ROE measures how effectively a company uses shareholders’ equity to generate profits. It’s calculated by dividing net income by shareholders’ equity. Higher ROE indicates efficient management and profitability.

=== Example: If a company has a net income of $50 million and shareholders’ equity of $200 million, its ROE is 25%. ===

=== 5. Debt-to-Equity Ratio ===
This ratio compares a company’s total liabilities to its shareholders’ equity. A lower ratio indicates a healthier balance sheet and lower financial risk.

=== Example: A company with $100 million in debt and $300 million in equity has a debt-to-equity ratio of 0.33, suggesting lower financial risk. ===