Difference between bottom approach and top down-02173
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vu mgt613 Production / Operations Management.
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vu mgt613 Mid Term Solved Past Paper No. 1.
Bottom-Up Approach to Fundamental Analysis
With the bottom-up approach, investors focus directly on a company's basics, or fundamentals. Analysis of such information as the company's products, its competitive position, and its financial status leads to an estimate of the company's earnings potential and, ultimately, its value in the, market. The emphasis in this approach is on finding companies with good long-term growth prospects, and making accurate earnings estimates.
Top-Down Approach to Fundamental Analysis
The top-down approach is the opposite of the bottom-up approach. Investors begin with the economy and the overall market, considering such important factors as interest rates and inflation. The next consider future industry prospects or sectors of the economy that are likely to do particularly well (particularly poorly). Finally, having decided that macro factors are favorable to investing, and having determined which parts of the overall economy are likely to perform well, individual companies are analyzed.
