FUNDAMENTAL ANALYSIS Definition

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FUNDAMENTAL ANALYSIS is a method used to evaluate the worth of a security by studying the financial data of the issuer. Performing fundamental analysis will teach you a lot about a company, but virtually nothing about how it will perform in the stock market. Apply this analysis on two competing companies or in comparison to its industry and it becomes clearer which the best investment choice is. See FUNDAMENTALS.

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TURNAROUND is the reversal of unfavorable circumstances of a business where an investment opportunity may exist. A firm may work with such a business to restructure the management and finances in order to take the greatest advantage of more favorable circumstances. There are organizations like the Turnaround Management Association that specialize in turning around failing companies.

PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING is instituted if your revenues exceed $10,000,000 (3-year average) or your contracts will not be completed within a two-year period, you are generally required to use the percentage of completion accounting for contracts. There are many advantages to using to percentage of completion method including: a. It is the best measurement of income; b. Percentage of completion normally needs to be computed for financial statement purposes eliminating confusing timing differences from tax to financial statements; c. There is no increase in alternative minimum taxable income; d. Losses can be recognized on contracts before the job is complete; e. It is useful in leveling taxable income, permitting use of lower tax brackets each year. When using the percentage of completion method, it is important to carefully compute the percent complete, for it may have a great impact on your taxable income. Estimated costs to complete the contract, a component of calculating the percent to complete, determine what your taxable income will be. Also, carefully reviewing the over-head allocation may result in lower tax.

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