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For an investor security evaluation and analysis is very important. What are the objectives of security analysis?
SOLUTION
•Capital appreciation
Security analysis is done to in order the investor to identify whether the investment is worthy pursuing in terms of the returns. If the investment yielding regular income as well as growth in value its considered suitable. capital appreciation. This is indicated by the increase in the prices of the security i.e higher selling price than buying price.
•Hedge against Inflation
Increase in cost of living attributed to lose of value of money is major problem to the world today. The difference between the buying price and the selling price must take of the inflation rate. The investment rate of return should be huge to neutralize inflation. Thus, the rate should be higher than inflation rate.
•Safety of capital
The capital invested in assets requires the safety. Analysis is therefore done to identify the rates of returns from assets through ascertaining their value now and the future values as well. Safety of capital is imperative as it is aimed at protecting the loss of capital and return from the investments.
•Regular income
Analysis on securities basically is gauge the levels and characteristics of income derived from the security. The investor will be interested in an income from the investment that is regular and consistent. Fluctuating income streams is considered not suitable for the long-term growth.
Daniel Nthiwa answered the question on March 20, 2022 at 10:17
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