# ANALYSIS

Analysists' consensus eps
• Abbreviated ACE. An estimate of EPS derived by tabulating the projections of Wall Street analysts who follow a particular company.

Barra's performance analysis perfan
• A method developed by BARRA, a consulting firm in Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.

Break even analysis
• An analysis of the level of sales at which a project would make zero profit.

Break even analysis cost volume profit analysis
• Indicates the level of operations necessary to cover all operating costs and the profitability associated with various levels of sales.

Cluster analysis
• A statistical technique that identifies clusters of stocks whose returns are highly correlated within each cluster and relatively uncorrelated between clusters. Cluster analysis has identified groupings such as growth, cyclical, stable and energy stocks.

Common base year analysis
• The representing of accounting information over multiple years as percentages of amounts in an initial year.

Common size analysis
• The representing of balance sheet items as percentages of assets and of income statement items as percentages of sales.

Comparative credit analysis
• A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target.

Conditional analysis
• Is the expectational methodology which is probability-based, event-driven, and operates within a market environment which has dominant and secondary aspects.

Country risk analysis models
• Country Risk Analysis Models incorporate variables such as Debt Service ratio, Import Ratio, Variance of Export Revenue. Domestic Money Supply Growth Rate and others to predict the probability of debt rescheduling problems.

Credit analysis
• The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. Related: default risk
• The evaluation of credit applicants.

Cross sectional analysis
• The comparison of different firms' financial ratios at the same point in time; involves comparing the firm's ratios to those of other firms in its industry or to industry averages.

Cyclic or cyclical analysis
• Is the study of recurring, preferably periodic, movements in prices or other time series.

Discriminant analysis
• Is a mathematical approach which tries to differentiate between classes, categories or clusters or groups. It is mostly used for Credit Scoring or predicting bankruptcies. It partitions a sample into Yes or No groups, Positive and Negative, or Bullish and Bearish.
• A statistical process that links the probability of default to a specified set of financial ratios.

Dupont system of analysis
• The system used by management to dissect the firm's financial statements and to assess its financial condition.

Dynamic analysis
• Is the approach to study market conditions over time. This compares to Static Analysis.

Electronic data gathering, analysis, and retrieval
• See EDGAR.

Factor analysis
• A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.

Fundamental analysis
• a) A method of evaluating securities by attempting to measure the intrinsic value of a particular stock. The method is based on fundamental factors, such as revenues, earnings, future growth, return on equity, profit margins, and so on, to determine a company's underlying value and potential for future growth. Fundamental analysts study the overall economy, industry conditions and the financial condition and management of particular companies. See also: Technical Analysis; b) A method of security analysis based on fundamental facts found in a company's balance sheet and income statement e.g. sales, earnings, dividends. These past records are examined to attempt to predict the company's future growth of sales and earnings as well as stock price growth, for example.
• Security analysis that seeks to detect missvalued securities by an analysis of the firm's business prospects. Research analysis often focuses on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm.
• Is the research approach which considers economic and monetary factors. For securities it evaluates the company as well as the industry and economy. For commodities, it looks at supply and demand in terms of actual usage, production and inventories among other things.

Horizon analysis
• An analysis of returns using total return to assess performance over some investment horizon.

Horizontal analysis
• The process of dividing each expense item of a given year by the same expense item in the base year. This allows for the exploration of changes in the relative importance of expense items over time and the behavior of expense items as sales change.

Management's discussion and analysis md&a
• MD&A is a supplemental report included in the annual report that allows the reader to look at the company through the eyes of management by providing a current and historical analysis of the business of the company.

Marginal analysis
• Economic principle that states that financial decisions should be made and actions taken only when the added benefits exceed the added costs.

Mean variance analysis
• Evaluation of risky prospects based on the expected value and variance of possible outcomes.

Multiple discriminant analysis
• Abbreviated MDA. Statistical technique for distinguishing between two groups on the basis of their observed characteristics.

• The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (1) What were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was market timing statistically significant? And (4), Was security selection statistically significant?

Portfolio analysis
• Is the methodology which quantified systematic and nonsystematic risk for investment holdings. Harry Markowitz is considered the primary influence in this field.

Pro forma capital structure analysis
• A method of analyzing the impact of alternative capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully.

Quantitative analysis
• The method of using mathematical models and quantitative values to analyze stocks and financial markets.
• Is the practice of using numerical techniques in researching securities, markets, strategies and structures.

Ratio analysis
• Involves the methods of calculating and interpreting financial ratios to assess the firm's performance and status.

Regression analysis
• A statistical technique that can be used to estimate relationships between variables.

Scenario analysis
• A behavioral approach that evaluates the impact on return of simultaneous changes in a number of variables.
• The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.

Sensitivity analysis
• An approach for assessing risk that uses a number of possible return estimates to obtain a sense of the variability among possible outcomes.
• Analysis of the effect on a project's profitability due to changes in sales, cost, and so on.

Sequential analysis
• Is a small sample, nonparametric method. It does not presuppose sample sizes or probability distributions. It is an effective technique to use when analyzing or monitoring hedge or trading programs. The approach uses Type I and Type II Error frameworks.

Static analysis
• Is the approach to study market conditions at a moment in time. It also called the Snapshot View of the market, corporate financial condition or other economic time series. It reflects one moment such as, the end-of-the-day, end-of-the-month, end-of-the-year, the opening or any other chronologically defined point. This compares to Dynamic Analysis.

Statistical analysis
• Is a mathematical approach which quantifies market action. In its general form, it is reliant on large sample statistics and linear analysis. It assumes independence. Its popular terms are: the mean, variance, standard deviation, alpha and beta.

Technical analysis
• A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value. Technical analysts study the price movement and trading volume for stocks by plotting graphs or charts. Using this method, technicians seek to make investment decisions by understanding and predicting investor sentiment and psychology. See also: Fundamental Analysis.
• Security analysis that seeks to detect and interpret patterns in past security prices.
• Is the study of market behavior which tries to discern patterns which enhance position taking. Among some of the tools and indicators used are: charts, volume, open interest, put to call ratios, moving averages, and oscillators. This compares to Fundamental Analysis and Conditional Analysis.

Time series analysis
• Evaluation of the firm's financial performance over time, utilizing financial ratio analysis.

Vertical analysis
• The process of dividing each expense item in the income statement of a given year by net sales to identify expense items that rise faster or slower than a change in sales.

All the adversity I've had in my life, all my troubles and obstacles, have strengthened me. . . . You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you. - Walt(er) Elias Disney