Technical Analysis is the forecasting of future financial price movements based

on an examination of past price movements. Like weather forecasting, technical analysis

does not result in absolute predictions about the future. Instead, technical analysis can

help investors anticipate what is "likely" to happen to prices over time.

technical analysis supports the efficient market theory as against the

"random walk theory" which supports the belief that stocks can be bought / sold on
random events like flipping a coin!!!

Fundamental analysis of a business involves analyzing its financial statements and health, its
management and competitive advantages, and its competitors and markets.

Line Chart is drawn by plotting the closing price of the stock on a given day and connecting
them to make charts

A bar chart displays any security’s open, low, high and closing prices. The bar
chart expands on the line chart by adding several more key pieces of information to each
data point.

The candlestick chart is similar to a bar chart, but it differs in the way that it is
visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line
showing the period's trading range. The difference comes in the formation of a wide bar
on the vertical line, which illustrates the difference between the open and close. And, like
bar charts, candlesticks also rely heavily on the use of colors to explain what has
happened during the trading period. White (clear) candlesticks form when the
close is higher than the open and black (solid) candlesticks form when the close is lower
than the open. The white and black portion formed from the open and close is called the
body (white body or black body). The lines above and below are called shadows and
represent the high and low.

1. Dabur India
2. P&G
3. Nestle
4. ITC

Debt-Equity Ratio

It indicates how much money is being placed by the creditors as that of equity holders. It
represents the proportion of borrowed funds in the total capital of the company.

Debt-Equity Ratio = Total Debt

Net Worth
Long Term Debt-Equity Ratio

A high long term debt to equity ratio suggests that a company has financed its growth mostly
via debt. f after debt financing, company earnings are greater than debt cost (interest) then
shareholders stand to gain. (Interest is cost of borrowing money). However if debt cost
outweighs returns generated from investment (of borrowed capital) then company may head
for bankruptcy in long run and shareholders’ interests will be adversely affected.

Current Ratio

The ratio is mainly used to give an idea of the company's ability to pay back its short-term
liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The
higher the current ratio, the more capable the company is of paying its obligations

Current Ratio = Current Assets

Current Liabilities

Fixed Asset Ratio

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of
fixed assets (on the balance sheet). It indicates how well the business is using its fixed
assets to generate sales.

Fixed Assets Turnover Ratio = ______Sales__________

Average net fixed assets

EPS (EARNINGS PER SHARE)

Earnings Per Share is generally considered to be the single most important variable in
determining a share’s price. It is also a major component used to calculate the price-to-
earnings valuation ratio. The EPS can be calculated as follows:

Earnings per Share (Basic formula) = _________Profit________

Weighted Average Shares
financial model

a financial model is designed to represent In mathematical terms the relationships among the
variables of a financial problem so that it can be used to answer “what if” questions or makes
projections.

BENEFITS

1.Increase the breadth of analysis leading to decision making.

2. Provides a framework for long- range planning.

3. Evaluating new forms and uses of financial information

4. Tools for special problems

5. Understand the inherent logic of the financial system

APPLICATIONS OF FINANCIAL MODELLING

1. Business valuation, especially discounted cash flow

2. Cost of capital or WACC

3. Financial statement analysis

4. Modeling and analysis of financial markets

5. Portfolio problems

6. Project finance