 The purpose of fundamental analysis is to identify those stocks that are mispriced relative to some measure of true value and that true value can be derived from some observable data. Now that observable data may come from many sources like accounting data, macroeconomic data, stock market data and many others. There are many sources from where data can be obtained very conveniently. In modern day carpet world, companies are required to file many types of returns with the regulatory agencies. We know that financial traders deal in readymade financial analysis and comparable data on accounting, stock market and macroeconomic aspects. So far as the valuation ratios are there, these valuation ratios are used to assess valuation of one firm compared to other firms in the similar industry. Regulus valuation models are there that are used necessarily to sort conflicting signals of value. We generally used the data obtained from financial statements and the data given in these financial statements is termed as the book value data. Now this book value data has certain limitations therein. Like financial statements are based on historical values. As we know, these statements are not based on the market values or the current values. Book values are based on historical cost whereas the market values are based on the current cost of the entity's assets, liabilities or other financial variables. Financial statements do not carry some hidden assets with good market value like goodwill or other intangible assets. For example, we see that an entity has assets of worth rupees 800 million and liabilities of worth rupees 200 million as per its accounting records. Now the net worth of this entity as per the accounting records comes to 600 million. Now this is the value that is derived from the books of accounts of that entity. But what about the market worth of this entity? If we see that the market value of the entity's assets is 850 million and the market value of its liabilities is 180 million. So the net worth of this particular entity is 670 million dollars worth in the market. So that is the market value which is quite different from the book value of the entity's net assets. There are certain valuation models that are used to determine the worth of an entity in terms of its securities. A firm may be sold at a market price below its book value. So there are certain valuation models that are used to determine the market value of an entity. Like we have liquidation value which says that the amount realized by breaking up the firm selling its assets, repaying its obligations or liabilities and distributing the remaining amount among the shareholders if there exists any residual amount. Then we have next the replacement cost. This is the amount that an entity would have to pay in order to replace its any existing asset at the present time according to its current worth. Finally we have a model that is called as Tobin's Cume. The Tobin's Cume is equal to the market value of a company divided by its assets replacement cost. So if we divide the market value of the assets of a company over their replacement cost, the resulting coefficient is termed as the Tobin's Cume. And ideally the value of Tobin's Cume is considered as good being equal to 1.