Qualitative Analysis
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Qualitative Analysis - What is it?
Qualitative analysis involves the analysis of information that cannot be quantified. Qualitative analysis is concerned with meanings, does not make generalizations without considering context, and provides broad descriptions rather than quantifiable measurements. Subjective judgments are applied, such as management expertise, industry cycles, and labor relations. Thus, qualitative analysis involves analyzing data and information that cannot be quantified or is difficult to measure. As opposed to qualitative analysis, quantitative analysis is based on numbers, calculations, and reports. Data and information that is regarded as qualitative include, for example, positive associations with a particular brand, as well as the trustworthiness of the leadership team. The focus of qualitative analysis is usually on individuals. Qualitative analysis also considers a company's business model and its competitive advantage.
Combining Qualitative and Quantitative Analysis
There are several weaknesses in quantitative analyses. In the past few years, McDonald's Corporation figures were not able to indicate any significant changes in people's attitudes towards unhealthy foods. Qualitative information is therefore of great importance. It is not easy to master qualitative analysis; it requires years of business experience to get a clear understanding of how a company operates. A person with this type of knowledge has an advantage over a person who relies purely on quantitative analysis.
Investors should consider qualitative information, such as subjective assessments of the integrity, trustworthiness, and business skills of the company's management when making investment decisions. Observations of employees, interviews with vendors doing business with the firm, and a review of the company's public reputation are also considered part of the qualitative analysis.
However, a purely qualitative approach also has its limitations. As an example, this approach is highly susceptible to bias resulting from personal biases and opinions. Therefore, qualitative and quantitative analysis are often used in conjunction, for example, to evaluate a company's viability as a business or to assess an investment opportunity's potential. Analyzing qualitative data can be time-consuming and requires a wide range of experience. A good wealth manager provides you with the best possible support through the combination of quantitative and qualitative analysis, as she/he has a broad range of expertise.
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