This chapter systematically explaining the theoretical foundations of thermal analysis. It begins with thermodynamic basics, including thermodynamic systems (closed, open, isolated systems, etc.), state parameters (temperature, pressure, entropy, etc.), equilibrium states, and thermodynamic processes (reversible vs. irreversible). It then elaborates on the First Law of Thermodynamics (energy conservation) and the Second Law (entropy increase principle, Carnot cycle efficiency), emphasizing the directionality and limitations of energy conversion. Further discussions cover finite-time thermodynamics, analyzing the relationship between efficiency and power output in practical heat engines, such as the Curzon-Ahlborn efficiency. Finally, it compares thermal analysis methods (energy balance, entropy analysis, exergy analysis), highlighting the advantages of exergy analysis in evaluating energy quality and energy-saving potential.