Ask Yourself Six Key Questions

    1. 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?

 

    1. 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?

 

    1. 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.

 

    1. Is the company a leader, preferably the leader, in it its field?

 

    1. How long has the company’s management been in power? How secure is its tenure?

 

    1. Finally, is there a reasonably broad market for the company’s shares?