Local, national and global economies today are solidly integrated. No company performs its business in isolation. Securities analysis therefore involves monitoring changes in the economic policies of local authorities and national governments.
Establishing the intrinsic value of a company's stock, an investor's primary goal, depends on the company's performance, but performance cannot be assessed without analyzing the economy in which it operates. Thus, fundamental analysis should begin with economic analysis. The intrinsic value of a security is based on a company's future earnings. Logically, economic analysis should focus not on the current economic situation but on possible future economic developments. This process is called Economic forecasting.
More precisely, the outlook for corporate earnings is affected by economic factors determining how much the company sells and how much it costs to produce the products for sale. These are call Supply and Expenditure factors.
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