Business Glossary

evaluation of a company's stock based on an examination of the firm's financial statements. It is distinguished from technical analysis, which attempts to predict the market price of a company's stock based on historical price performance and overall stock market trends. It considers overall financial health, economic and political conditions, industry factors, marketing aspects, management quality, and future outlook of the company. The analysis attempts to ascertain whether stock is overpriced, underpriced, or priced in proportion to its market value. Fundamental analysis provides much of the data needed to forecast earnings and dividends. Fundamental analysis tools include horizontal analysis, vertical analysis, and ratio analysis, which give a relative measure of the operating performance and financial condition of the company.

means of predicting stock prices based on historical price and trading patterns; it is not concerned with the financial statistics that are the focus of fundamental analysis. It uses charts (e.g., head and shoulders, rising bottoms) to identify trends in the market or individual securities. Technical analysts believe the market can be predicted in terms of direction and magnitude. Stock prices tend to move with the market because they react to various demand and supply forces. An attempt is made to uncover a consistent pattern in prices or a relationship between stock price changes and other market data. Technical analysts try to predict short-term price changes and then recommend the timing of a purchase or sale. A sample company stock chart follows:

determination of (1) property covered, property excluded; (2) perils covered, perils excluded; (3) location covered, location excluded; (4) time period the policy is in force; (5) persons covered, persons excluded; (6) policy limits; and (7) coinsurance requirements.

analysis of uncertainty of financial loss. This classification can be according to whether a risk is fundamental, particular, pure, speculative, dynamic, or statick. In life insurance the process by which a company determines how much to charge for a policy according to an applicant's age, occupation, sex, and health.