By
admin on May 10th, 2009
- Choose company that have great CEO. The company depends on the leadership of the CEO. He must serve as a
motivator for his employees and strategist for the company. You can see the capability of the CEO from his track record. Does he can bring the company better previously? Look at their degrees and job experience. Where have they worked and for how long? Would you hire that individual to run your company? If the company have known politician to sit on its board, he will help the company with his experience on working in the government. Retired military officials are also very beneficial to companies if he is in the board.
- Companies that have over seas production can take advantage of lower cost. Lower cost can bring higher sales to more customers and a higher profit margin on each unit.
- Companies that operates over seas can enter in untapped market, this will usually bring more sales.
- Company must have competitive advantage from other company. If a company is selling the same product and service, then they are the same as other company. How can they beat other company if they don’t have any advantage from other company.
- Find companies which is expanding. One criteria of this is the company is hiring new employees.You can try speaking to the human resources human manager ask her if she is hiring. If the human resources manager tells you that they are hiring employees it is very important to find out for what positions. The position they are looking can tell you where the company is heading. You can ask him by telling that you are a prospect investor for the company and would like to know more about the company.
- Survey the company’s supplier. Ask them what they think about the company. Do they like doing business with them? Do they pay on time?
- Survey the company’s customer. Ask them what they think about the company. Do they like buying from the company?
- The company have reasonable debt. To measure the safety of a company, we use the debt to equity ratio (D/E). It is a financial ratio indicating the relative proportion of equity and debt used to finance a company’s assets. This ratio is also known as Risk or Gearing. It is equal to total debt divided by shareholders’ equity. The two components of debt and equity are often taken from the firm’s balance sheet, but the ratio may also be calculated using market values for both, if the company’s debt and equity are publicly traded, or using a combination of book value for debt and market value for equity.
A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as the result of interest expense. If a lot of debt is used to finance increased operations, the company could potentially generate more earnings. If this earnings is greater than the debt cost (interest), then the shareholders will benefit. However, if the cost of this debt outweigh the return that the company generates on the debt through investment and business activities, the company can go bankrupt.
The debt/equity ratio depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.
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