# Fundamental Analysis of Corporate Data

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# Fundamental Analysis of Corporate Data

Fundamental analysis uses information from a corporation’s financial statements to determine the company’s intrinsic value. It takes all this company information and interprets it using a wide array of measurements.

### Things To Know

- Analysts use various figures taken from a company’s financial statements to determine what a company is worth.

## Important ratios and other figures

**Liquidity ratios**measure the degree to which a company’s assets can be converted to cash without a loss of income.- The
**current liabilities**of a company, such as accounts payable, get paid with its current assets, such as accounts receivable. - A
**current ratio**divides a company’s assets by its liabilities. The higher the ratio, the better the company scores. - The difference between what a company has on hand (ready assets) and what it owes (liabilities) is called
**net working capital**. - To find out how quickly a company’s customers pay their bills, analysts look at
**accounts receivable turnover**. This is the ratio of a company’s net credit sales and its average accounts receivable. **Inventory turnover**is the ratio of a company’s yearly sales to its inventory. High turnover is a good sign, indicating strong sales.- Dividing a company’s long-term debt by its net worth gives analysts the
**debt-to-equity ratio**. A high ratio means a company is a risk because it needs its investment interest to pay off its debts. - To look at a company’s profits, analysts use
**net profit margin**, which is simply a company’s net income divided by gross revenue. Net profit margin shows the percentage of each company dollar that made a profit.

Many factors go into the fundamental analysis of a security. You can evaluate securities by looking at company stock, dividend-paying ability, or growth potential. Either way, you will be well armed to invest with confidence.