Ask Yourself Six Key Questions
- Does the company have a long record of earnings, with an unbroken, or almost unbroken, record of rising earnings for at least the past 10 years?
- Has the company’s growth been financed by borrowing money, by the issuance of additional shares of stock, or has it been financed entirely by plowing earning back into the business?
- Does the company, thanks to having prudently husbanded rather than distributed its earnings, have a debt-free or almost debt-free balance sheet? Of course, any company is always in debt short term for purchased materials or other inventory. It would hardly be practical to operate on a C.O.D. basis.
- Is the company a leader, preferably the leader, in it its field?
- How long has the company’s management been in power? How secure is its tenure?
- Finally, is there a reasonably broad market for the company’s shares?