Traders who are stock picking companies to invest in will have come across these charts when they are performing fundamental analysis of their stock picks. Financial charts are used to convey important information in a graphical format. Companies will use them to show growth and performance in their market area. Financial analysts will use them as a tool while preparing various reports on the financial statement in a company. They can also be used by investors who understand how to perform chart analysis on a company, and may be used in conjunction with stock charts.
The reason that investors look at fundamental analysis of a company is to see if the company is healthy financially and to be sure that the company is strong enough to be in existence for the long term. Fundamental analysis will look at the company’s value from its management, balance sheets, industry sector and many other areas of the company’s operations. The biggest part of the Fundamental analysis is looking at financial statements such as revenue, expenses, assets, liabilities and other financial aspects. The use of financial charts plays a major role while analyzing these areas. Technical analysis, unlike fundamental analysis, does not care about the value of the company, but looks mainly at price and volume movements in the past, and identifies similarities in the present stock market.
The income statement of the company is of particular importance to investors, as it shows how much money the company generated and how much it spent. The difference between the two will show how much profit the company made. Financial charts that show the company has low expenses relative to revenues will make it a favorable stock pick for investors. A company should have long term revenues and not short term revenues derived from a promotion. If its revenue increases are temporary and not sustainable, then investors will be cautious of investing in the company.
The balance sheets are important as they show investors the company’s assets and liabilities. When it comes to assets, there are two type’s; current assets and non -current assets. The former tends to be converted to cash or used up in one business cycle. Investors looking at a company will be attracted to it if it has surplus amounts of money on their balance sheets. By looking at the financial charts information on cash, inventories and account receivables, investors will be able to judge if the company can pay off its debts and stay in business for the long term.