This writer has opinion that fundamental analysis is difficult to master for it to be useful as a forecasting tool. Understanding and analyzing balance sheets and profit and loss accounts is not enough. You will need to analyze micro and macroeconomic picture as well. Often you will need to be have same knowledge equivalent to senior-management of a company you want to analyze – minus leadership and management skills.

Take example of Google’s free 2 GB e-mail service. How much does it cost them? Probably about $2 yearly for each customer. Assuming 100 million internet users sign up, advertising revenues from this segment alone would provide a tidy profit. It is analyst job to provide a good educated-guess of this number. More importantly, this new signings will provide a customer base to challenge Yahoo and Microsoft. With Google’s dominance in search engine market, data mining of such a huge pool of internet users will provide them with an edge in deciding future strategies over its two nearest rivals. Try translating this to what can Google earn in next two quarters.

One of better tools is Z-Score, developed by Edward Altman, a financial economist and professor at New York University's Stern School of Business, in 1968 to predict corporate bankruptcies within a two-year period. This formula has a 70-plus percent accuracy rate

Technical analysis. The “price action discounts everything” premise is central to charting, also known as technical analysis. Technical analysis uses graphic representations for prices and makes uses of various quantitative techniques to forecast price trends.

A technician makes profits in any market by having positions in line with price trend. When trend is up, then buy. Conversely, when trend is down, then look to sell. Technical analysis is not an exact science, but it is easy to learn and effective.

Technical analysis is a good starting point for beginners. The foundation should include classical technical analysis, Japanese candlesticks, trendlines, RSI, MACD, ADX, stochastics and moving averages. Learners can complete these core topics within three to six months. With constant practice, you should be able to independently analyze and identify current trends in stock market.

Cash flow numbers are not credible. They never reflect business reality. Using them in a business plan tells a potential investor that you are either stupid or dishonest. This isn't message that you want to convey to a potential investor in your company.

Credible numbers are reports that your accounting software can produce for you. The two reports that should be in your business plan are your current Balance Sheet and your Profit and Loss Statement (P&L). Many investors may request these reports for past years, as well.

A Balance Sheet lists your company's assets, liabilities and owner's equity in company. It's measure of your company's financial health. It tells an investor what you are doing. It tells investor net worth of your company. It allows investor to determine your company's ability to pay your debts. It will identify potential liquidity problems. An investor can also spot degree to which a company is leveraged, or indebted.

Only family, friends and fools invest in a company to pay off its debts. Your balance sheet will give a potential investor Liquidity Ratios needed to determine if debt service is actual goal of equity investment. The usual tests run on your balance sheet will be Current Ratio, Quick Ratio, Working Capital and Leverage. You should run these tests to know their outcome, before you submit your business plan to a potential investor.

The Profit & Loss Statement is a snap shot of your balance of money as it flows through your business over a specific period of time, such as a month or a year. The P & L break out revenues or income, expenses and profit or what is left over. A Profit and Loss statement is easiest way to tell if a business has made a profit or taken a loss over a given period of time. The most important figure referred to in it is net profit (also called Retained Earnings) or what is left over after revenues are used to pay expenses and taxes.

If you don't understand financial reports read a book on topic, before you submit a business plan to any investor. Here are three popular titles:

1. How to Use Financial Statements: A Guide to Understanding Numbers -- by James Bandler. 2. The Interpretation of Financial Statements -- by Benjamin O. Graham, Spencer B. Meredith. 3. The Guide to Understanding Financial Statements -- by S. B. Costales.

There are two business groups who usually object to using credible numbers in business plans. Swindlers, who argue that you should sell sizzle and not steak. After all, they never have any steak to sell. And, entrepreneurs of startup companies who argue that credible numbers are negative numbers and thus using their P&L and Balance Sheet reports will turn away potential investors.