financial analysis

Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related entities to determine their performance and suitability. It involves assessing financial statements, such as the balance sheet and income statement, to understand a company's financial health, profitability, and risk.

Two primary methods are used:
* Fundamental analysis examines a company's intrinsic value by looking at its financial health, management, competitive position, and external economic factors. Key tools include financial ratios like the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and price-to-sales (P/S) ratio.123
* Technical analysis studies historical price and trading volume data to identify patterns and predict future price movements.1

Financial decisions aim to balance profitability with risk to maintain the long-term value of a firm's securities.4