ANSWER 1

(A)

Fundamental analysis

of a business involves analyzing its financial statements and health, itsmanagement and competitive advantages, and its competitors andmarkets.When appliedto futures and forex,it focuses on the overall state of the economy, interest rates, production,earnings, and management. When analyzing a stock, futures contract, or currency usingfundamental analysis there are two basic approaches one can use; bottom up analysis and topdown analysis.

The term is used to distinguish such analysis from other types of  investmentanalysis,such as quantitative analysis and technical analysis. Fundamental analysis is performed on historical and present data, but with the goal of makingfinancial forecasts.There are several possible benefits to analyze the market:

to conduct a company stock valuation and predict its probable price evolution,

to make a projection on its business performance,

to evaluate its management and make internal business decisions,

to calculate its credit risk .

A security is a financial asset representing a claim on the assets of the issuing firm and on theprofits produced by the assets. The term security analysis pertains to the process of identifyingdesirable investment opportunities in such financial assets. In the case of corporate stocks andbonds, the analysis flows from the interpretation of accounting and financial data regardingoperations, profitability, net worth, and the like. Investment alternatives are identified based on(1) the investor's risk/reward ratio, (2) a specified time horizon, and (3) current market prices.

Security analysts, in essence, are the catalysts which drive the efficient market hypothesis. Thatis, "smart" money will logically and efficiently distribute itself in such a way that security pricesreflect all available information. As new information becomes available, analysts assess it andrecommend market price adjustments according to changes they anticipate for price levels. Thecumulative impact of price adjustments moves the market to equilibrium so that the price of anysecurity approximates true investment value.

Security analysts operate in three arenas, each reflecting a different set of goals and objectives.Investment banking and brokerage firms represent the "sell" side of security analysis. Theirclients are fee and commission paying institutional and individual investors.

(B)

The relative valuation ratios to evaluate a stock should be used in cases where:

(1) a good set of comparable entities (e.g., industries or similar companies) exists,

or

(2) when the aggregate market is not at a valuation extreme (e.g., a seriously

overvalued or undervalued market) or

(3) when a firm does not pay dividends

(C)

The discounted cash-flow valuation approaches can be used for stocks that pay dividends,

particularly in the case of a stable, mature firm where the assumption of relatively

constant growth for the long term is appropriate.

The present value of operating cash flow technique can be used when comparing firms

that have diverse capital structures.

The present value of free cash flow to equity is important to an equity holder since this

approach measures the amount of cash flow available to the equity holder after debt

payments and expenditures to maintain the firm’s asset base.