Valuing a company involves not only crunching numbers and predicting cash flows but also looking at the general, more subjective qualities of a company.
he backbone of any successful company is strong management. The people at the top ultimately make the strategic decisions and therefore serve as a crucial factor determining the fate of the company. Investors can simply ask the standard five Ws: who, where, what, when and why?
You should know who its CEO, CFO, COO and CIO are. Then You need to find out where these people come from, specifically, their educational and employment backgrounds. Ask yourself if these backgrounds make the people suitable for directing the company in its industry. After that, ask about what is the management philosophy? You can discern the style of management by looking at its past actions or by reading the annual report's management, discussion & analysis (MD&A) section. Ask yourself if you agree with this philosophy, and if it works for the company, given its size and the nature of its business. If you see a company continually changing managers, it may be a sign to invest elsewhere. On the manager, ask does this person have the qualities you believe are needed to make someone a good manager for this company?
Also what a company does and how it makes money.You need a solid understanding of how a company actually generates revenue in order to evaluate whether management is making the right decisions.
Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at sales and earnings. This strategy may be one of the simplest, but it is also one of the most effective ways to evaluate a potential investment.
Source: Investopedia
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