Each individual investor will have his or her own interests and appetite for information regarding investments. The following are offered only as suggestions in forming a general guideline of different aspects to consider in the information gathering process.
In researching and doing a diagnosis of a company, you may want to consider various different aspects, including:
Basic information on the company and its organization
Economic and financial data
Marketing and commercial factors
Industrial capacity and level of technology
The human factor
The Company and its Organization
Information of interest may include when the company was founded, its legal structure, the company’s owners, its total capital, related companies, and any litigation in which the company may be involved. General data on the company could also include its objectives, historical evolution, and organization chart. News or press releases will provide up-to-date information on the company and its activities.
Economic and Financial Data
General information on the economic environment in which the company operates, and particularly its sector of the economy, can be found in business news from the different press sources and in reports and analysis done by market researchers, brokers, and investment advisors. If you want to do some research on your own, you can find more in-depth financial information on the company in its annual reports and financial statements.
Some factors to look at include growth in annual sales as compared to the company’s industry sector, growth of profits, investments made, profits as a percentage of sales, profits as a return on investment, owners’equity, self-financing capacity, ratio of current assets to current liabilities, bank balances, inventory levels, level of indebtedness and interest costs, and debt to equity ratios.
Other data could include the company’s creditors, with references from their lender banks, and the company’s principal customers and suppliers, with data on collection and payment terms. Commercial reports from the industry sector can provide valuable information. And in a company with a significant investment in property, plant and equipment, information on the age and state of repair of its facilities can be useful, along with any information about the insurance coverage the company carries. If you can find a budget or projection, you will be able to see what the company has planned for the future.