finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

, Security analysis is the evaluation and assessment of

stocks Stocks are feet and hand restraining devices that were used as a form of corporal punishment and public humiliation. The use of stocks is seen as early as Ancient Greece, where they are described as being in use in Solon's law code. The law de ...

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

to determine their investment potential. It involves analyzing various factors, such as financial statements, industry trends, market conditions, and company-specific information, to make informed investment decisions. There are two primary approaches to security analysis,

fundamental Analysis Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, Liability (financial accounting), liabilities, and earnings); health; Competition, competitors and Ma ...

and

technical Analysis In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. As a type of active management, it stands in contradiction to ...

. Security analysis deals with finding the proper value of individual securities (i.e., stocks, bonds and derivatives). These are usually classified into debt securities,

equities Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion t ...

, or some hybrid of the two. They can also include derivatives such as tradeable

credit derivative In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the ''credit risk''"The Economist ''Passing on the risks'' 2 November 1996 or the risk of an event of default of a corp ...

s, commodities,

futures contract In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...

s and options even if some of these are not technically securities. The definition of what is and what is not a security varies by analyst but a common definition is the one used by the United States Supreme Court decision in the case of SEC v. W. J. Howey Co. Security analysis for the purpose to state the effective value of an enterprise is typically based on the examination of fundamental business factors such as

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

s, going concern, business strategy and forecasts..

References

{{DEFAULTSORT:Security Analysis Financial markets

See also

References