|
Excellent Snoopy. Also liked your ''quality' and
'value' response.
I would add .. executive salaries and benefits should not
be excessive given company results. What is
excessive?
Quality & Value: Company doing well, shareholders
doing well - company has long-term plans and strategies and is achieving
revenue and profit objectives - satisfied customers, satisfied staff,
satisfied product/service providers - executives earn big salary or
bonus based on meeting performance objectives.
Company not doing well, shareholders not doing well -
likely to be no clear long-term plans and strategies for sustainable growth, not
achieving revenue and profit objectives, probably practising knee-jerk
cost-cutting (lay off staff = divest intellectual capital), unsatisfied
customers, unsatisfied employees, unsatisfied product/service providers. If
executives are still earning the big dollars in this scenario I don't find
it an attractive proposition.
Pressure to produce big results and big
profits quickly can equate to pressure to shelve long-term sustainable
growth in favour of short-term unsustainable growth.
Lots of overnight success stories out there. How many are
still around?
Regards,
Cris
----- Original Message -----
Sent: Wednesday, October 22, 2003 3:52
PM
Subject: Re: [sharechat] LPC Revised
Outlook
Hi smasha,
>
> Snoopy mate - how do
you manage to
> a) glean all this information,
>
Short
answer:
1/ Go to the company website and read the accounts
information in
the annual report. If you are a shareholder it is
easier. The annual
report is sent to you :-).
2/ Check the
latest news releases from the company. I find Ben
Dutton's
site 'Stocknessmonster' good for that, and of course
sharechat itself for
any recent news developments on the company.
and in this particular
case /3/
3/ At the AGM keep your ears peeled for information that will
affect the
next years profit (like information on revenues and
expenses). It is
quite a simple relationship for determining
profit:
"Profit is the difference between Revenues and
Expenses."
It follows from this statement that if expenses go up and
revenue
remains the same then profit will go down. Based on this you
can start
to ask 'What if?' questions.
What if the company spends
$Xm on some project? How will that
affect the
profit? You can try to bring in 'high powered mathematical
tools' to help answer this question if you like, but usually simple
arithmetic is perfectly satisfactory.
>
> and
> b)
know how to "run the rule" over it......?
>
Ah, this is where it
gets more complicated. There is no 'one best way'
to run the
rule over information.
My own preference is to keep any analysis of the
numbers relatively
simple and always start with as good dose of common
sense.
A specific example: The debt position of LPC.
There are all sorts of
buzz word accounting phrases around: 'good
debt/equity ratio' 'have a
strong balance sheet' etc.
etc. I prefer a much simpler appraoch
than any of
those concepts.
I prefer to answer the question:
"Do they have
enough money coming in to pay the bills?"
More specifically I like to
phrase the question in home mortgage terms.
If you stick all your
income towards paying off your debts (mortgage)
how long will it
take you? The method for calculating what you want
then becomes more
obvious.
1/ Figure out how much debt he company has. This
is the long term
'debt on the house' (long term liabilities), not the
'weekly grocery bill'
(current liabilities). The current
liabilities are usually taken care of by
the currrent assests.
Take the LT debt, divide it my your annual income, and then you have
a figure (in years) needed to pay off the debt. I think that is a
figure
that most people can relate to. Which is why I use
it!
You can find out the debt from the 'statement of financial
position' in
the annual report. The net profit is in the
'statement of financial
performance'. Divide the latter into the
former and you have your
answer.
Usually all this
information is presented in a form that includes
comparative figures for
the previous year. You can cast your eye
across the year to year
comparison and see if any of the numbers are
significantly out of
whack. The figure that stood out for me was the
'short term
borrowings' which had more than tripled during the year
while the business
remained substantially the same. This alerted me
to the fact that
some of these 'short term borrowings' may not have
been 'short term' after
all. So I made an adjustment to reflect that.
>
>I'd be extremely interested to hear how you do it if you feel
like
>sharing.....;-)
>
Has that helped answer your
question? Felll free to probe further if
you would like anything
else explained.
SNOOPY
--
Message sent by Snoopy
on Pegasus Mail version
4.02
----------------------------------
"Sometimes to see the wood from
the trees,
you have to cut down all the
trees."
----------------------------------------------------------------------------
To
remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/
|
See IRG research reports
