Step-by-Step Stock Analysis: Ratio, Financial & Technical Analysis by Dhanarthi

Investing in stocks can feel overwhelming, especially if you’re a beginner. But with the right approach, stock analysis can become straightforward and rewarding. Understanding the fundamentals of stock analysis and using tools like Dhanarthi can help you make informed decisions and maximize your returns. In this guide, we’ll break down the step-by-step process of ratio, financial, and technical analysis.

Why Stock Analysis Matters

Before investing, it’s essential to know a company’s health and potential growth. Fundamental stock analysis allows you to assess the company’s financial performance, management quality, and market position. Meanwhile, technical insights help you determine the right timing to buy or sell. Combining these methods creates a well-rounded strategy that minimizes risk and improves profit potential.

Step 1: Ratio Analysis – Evaluate a Company’s Health

Ratio analysis is the cornerstone of fundamental analysis of stocks. It helps you assess profitability, liquidity, leverage, and operational efficiency.

Key Ratios to Know:

• Liquidity Ratios – Check the company’s ability to meet short-term obligations.
  Example: Current Ratio = Current Assets ÷ Current Liabilities
  
  

• Profitability Ratios – Measure the company’s ability to generate profit.
  Example: Net Profit Margin = Net Profit ÷ Total Revenue × 100
  
  

• Leverage Ratios – Assess how much debt the company uses to finance operations.
  Example: Debt-to-Equity Ratio = Total Debt ÷ Total Equity
  
  

• Efficiency Ratios – Evaluate how well resources are used.
  Example: Asset Turnover = Sales ÷ Total Assets
  
  

Benefits of Ratio Analysis:

• Provides a quick snapshot of financial health
  
  

• Compares companies within the same industry
  
  

• Highlights potential financial risks
  
  

Step 2: Financial Analysis – Understand the Money Flow

Financial analysis dives deeper into a company’s fundamental stock analysis by examining its financial statements:

• Income Statement – Reveals profits and losses
  
  

• Balance Sheet – Shows assets, liabilities, and equity
  
  

• Cash Flow Statement – Tracks cash inflows and outflows
  
  

Methods for Financial Analysis:

• Horizontal Analysis – Compare financial figures over time
  
  

• Vertical Analysis – Express items as a percentage of total revenue
  
  

• Trend Analysis – Identify growth patterns or declining performance
  
  

By analyzing these statements, you can make confident decisions based on a company’s actual financial performance rather than speculation.

Step 3: Technical Analysis – Timing Your Trades

While ratio and financial analysis help you decide what to buy, technical analysis tells you when to buy or sell. It studies stock price patterns, volume, and trends to forecast future movements.

Basics of Technical Analysis:

• Support & Resistance Levels – Key points where stock prices tend to reverse
  
  

• Trends – Identify upward, downward, or sideways movements
  
  

• Indicators – Use Moving Averages, RSI, and trading volumes to guide decisions
  
  

Steps to Conduct Technical Analysis:

1. Study the stock chart over recent months
   
   

2. Identify the trend direction
   
   

3. Locate support and resistance points
   
   

4. Observe chart patterns
   
   

5. Check trading volume and momentum
   
   

How Dhanarthi Simplifies Stock Analysis

Analyzing stocks manually can be time-consuming, especially for beginners. Dhanarthi offers an intuitive platform to perform fundamental and technical stock analysis with ease.

Key Features:

• Comprehensive ratio and financial reports
  
  

• Real-time technical analysis indicators
  
  

• Simplified visual charts for quick insights
  
  

• Reports available in multiple languages for Indian traders
  
  

By using Dhanarthi, you can combine ratio, financial, and technical analysis in one place, saving time and making smarter investment decisions.

Common Beginner Mistakes to Avoid

• Relying on only one type of analysis
  
  

• Following tips without personal research
  
  

• Ignoring long-term trends
  
  

• Investing without proper risk management
  
  

Conclusion

Mastering ratio, financial, and technical analysis is key to becoming a successful investor. By understanding the fundamentals of stock analysis and leveraging platforms like Dhanarthi, beginners can take confident steps toward informed investing. Start analyzing today, and transform your stock trading strategy from guesswork to data-driven decisions!