Understanding Stocks
Understanding Stocks
Understanding Stocks
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10<br />
C H A P T E R<br />
Fundamental Analysis:<br />
Tools and Tactics<br />
Fundamental analysts use a number of tools to evaluate and measure<br />
stocks. After all, before you buy a stock, you want to be sure that the<br />
company is of good quality and that it is a good value at the price.<br />
Investors who primarily use fundamental analysis to choose stocks typically<br />
use a variety of tools to decide which stocks to pick. In this section,<br />
I briefly describe some of the most popular.<br />
Income Statement: Learning How<br />
a Company Makes Money<br />
One of the best ways to determine how much money a company is making<br />
is by looking at its income statement. This contains a lot of useful<br />
information, such as the company’s sales, operating expenses, and<br />
earnings. Figure 10-1 gives the income statement for Florida Star.<br />
The top line of the income statement gives the company’s sales or<br />
revenue (also referred to as the top line). Look to see if the company’s<br />
97<br />
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