Even a clock that does not work is right twice a day

Even a clock that does not work is right twice a day

By Robin Trehan, B.A, MIB, MBA electronic business

Even a clock that does not work is right twice a day is a good statement and it is true that we do sometimes stumble on precious stone but the probability of it's happening in business world is pretty dim. In this process business clock does not give the right time twice a day! What is needed is a proper business analysis, and than one have an idea of what the business is worth. On this route financial analysis is of prime value. The following point need to be kept in mind while doing financial analysis-

Is the company public or private entity?

The business's sales and earnings for the past five years?

Salaries/dividends have been paid to owners and stockholders for the past years?

Is the top management having very high salary and cashing out.

How does the financial analyst perceive the company in case it is public company?

In case it is private, what is the market image for it?

The state of inventory? What is the normal inventory level, and where is it presently?

Is there a redundancy factor to the inventory?

The details of the accounts receivable and accounts payable?

What loans are outstanding, to whom are they payable, and on what terms?

What is included in accrued expenses payable, and what is the current amount?

Are all taxes current?

What overhead rates are used in determining costs?

What are the company's departmental budgets?

Does the company own equity in any other businesses?

What liabilities exist in connection with warranties?

Are there any existing claims or known liabilities?

Are there any contract disputes or negotiations?

Are there any outstanding stock options or the like?

How much is the working capital?

How much is the current ratio?

How much is the quick ratio?

How much is the quick ratio?

Debt/Worth Ratio?

Today's preparation determines tomorrow's achievement and it is very true if we want to enter into the game. Let's the clock give the right time everytime! Even a clock that does not work is right twice a day but let' s try to improve the probablity.

Robin C. Trehan

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