Qualitative analysis uses unquantifiable and subjective information, such as company culture, reputation, and employee and customer satisfaction, to evaluate the performance of a company. Qualitative analysis is by nature abstract and inexact, and must be tempered by the analyst's own best judgement. As such, in order to get a more complete picture, qualitative analysis is often paired with additional quantitative analysis, which is the analysis of numerical and measurable values, such as the return on investment (ROI) or earnings per share (EPS). An investor looking to do a qualitative analysis of a company may start by getting to know the management. For example, it would be important to note whether they got their position through hard work or through a connection. Answering these questions may be difficult, because not all companies are willing to let investors probe into the business freely. Many investors rely on news reports and company filings to get a sense of the philosophy and personality behind a company. One particularly useful report for this kind of analysis is the management discussion and analysis (MD&A) section of a company's 10-k report, which is required by the SEC to be published to shareholders.Define Qualitative Analysis in Simple Terms
What Is Qualitative Analysis in Finance?
Qualitative Analysis in Investing
Qualitative Analysis FAQs
Qualitative analysis uses unquantifiable and subjective information, such as company culture, reputation, and employee and customer satisfaction.
Qualitative analysis is used to help evaluate a company's performance.
Quantitative analysis is the analysis of numerical and measurable values, such as the return on investment (ROI) or earnings per share (EPS).
The analysis starts with trying to find the story behind the story, such as whether the CEO or managers received their positions through hard work or connections. Are employees passionate about their work? Are customers satisfied with the product or service?
Many investors rely on news reports and company filings to get a sense of the philosophy and personality behind a company.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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