Theories on Financial Analysis - 6426 Words

Theories on Financial Analysis The landmark study of financial analysis is â€Å"Security Analysis† by Benjamin Graham (an investment manager) and David Dodd (professor of finance at Columbia). The first edition was 1934, about the worst period in the financial history of America. Despite being in the middle of the Great Depression, their analysis and recommendations were professional and hard boiled. They distinguished investment from speculation, but considered most investments in common stock as speculative. The focus of financial analysis has changed substantially since then, but a historical foundation in financial analysis requires quite a bit of time with Graham and Dodd. This research thesis is about the financial statement analysis of†¦show more content†¦The best-known, and most-widely used, multiple discriminant analysis method is the one proposed by Edward I. Altman. His model uses five financial ratios weighted in order to maximize the predictive power of the model. The model produces an overall discriminate score, called a Z score or zeta model. Altman’s Z-score combined various measures of profitability or risk. The resulting model was one that demonstrated a company’s risk of bankruptcy relative to a standard. So different authors use different ratios to know the financial position of the firms The trend analysis of the firm financial statement is also helpful in studding the financial history of the firm for comparison by looking at the trend of particular ratio one sees whether that ratio is falling, rising or remaining relative constant this help detect problem or observe good management in the research project the fixed base and moving base trend analysis is used. Further the common size analysis express comparison in percentage this is mainly used for making comparisons of firm of different size much more meaningful. http://jamshedpak.hubpages.com/hub/Theories-on-Financial-Analysis ------------------------------------------------- Stability theory In mathematics, stability theory addresses the stability of solutions of differential equations and of trajectories of dynamical systems under small perturbations of initial conditions. The heat equation, for example, is a stable partial differential equationShow MoreRelatedEssay on Financial Theory Discussion and Analysis1860 Words   |  8 PagesFinancial Theory Discussion Analysis Content A. Capital Asset Pricing Model B. Advantages Disadvantages of CAPM C. Security Market Line D. Systematic Unsystematic Risk E. Business Cycle F. Efficient Market Hypothesis G. Firms of Efficient Market Hypothesis H. Selective Publicity and Stock Prices – Discussion upon Journal Question 1: a). 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