| In order to become a smart investor, there are | | | | function? |
| certain things about stocks that you must | | | | Some businesses require more capital in order to |
| become familiar with. Thorough investigation of | | | | generate profits. As a rule, the less capital it takes |
| the product or commodity is critical, because the | | | | to operate a business, the more attractive it will |
| more you know about the stock you want to | | | | be to an investor. Companies with good profit |
| buy, the better your chances are on receiving a | | | | margins are more attractive to business people, |
| high return on your investment. Here are some | | | | which means those companies have more |
| baseline questions that will provide the answers | | | | marketability in the economy. That in turn creates |
| about each stock you consider purchasing. | | | | a higher return rate on the stock purchased. |
| What is the source of the company's cash flow? | | | | Does the management of a company have a |
| To answer this question properly, it is important | | | | friendly shareholder orientation? |
| to be as specific as possible about the company | | | | It is a given fact that how a company treats its |
| you wish to buy stock from. Avoid making | | | | shareholders determines its success in the stock |
| assumptions that can create a false picture of | | | | market. Satisfied, happy shareholders will buy |
| what the company's cash flow really is; it is critical | | | | more stocks and refer other people to buy stock |
| to have the correct information because it's the | | | | for the company. Keeping shareholders informed |
| only way to know which stock is best to invest | | | | on the status of the return rate on their stock is |
| in. For example, Toshiba Corporation sells laptops | | | | a good way for management to ensure friendly |
| in various discount stores throughout the United | | | | relations with them, thereby increasing |
| States. Initially, one would assume that this is the | | | | shareholders' purchasing power and thus making |
| company's main cash flow. However, through | | | | more money. |
| further investigation, it is discovered that Toshiba | | | | Are the actions of the management of a certain |
| has a global 'pay for support' service that is their | | | | company consistent with what they say in public? |
| main source of cash flow. An investor would gain | | | | Simply stated, the more honest that |
| a much higher return on investment if he | | | | management is within any company, the more |
| purchases stock in the 'pay for support' area of | | | | investors they will attract and retain. For example, |
| Toshiba Corporation. | | | | creating false rate return reports on company |
| How much cash is generated by the company, | | | | stock in order to increase sales and make money |
| and when? | | | | would seriously strain relations between the |
| Once you have determined the source of the | | | | company and its shareholders. The investors |
| highest cash flow for the company you have | | | | would more than likely sell their stocks rather than |
| chosen to invest in, you need to estimate the | | | | stay with a company that was dishonest. It is |
| total amount of cash made, as well as when the | | | | crucial for companies that sell stock to be honest |
| cash flow takes place. For example, you estimate | | | | at all times with their shareholders. |
| that Toshiba Corporation makes $30,000 per day | | | | If you can answer the above questions to your |
| during the month of December. As time goes on, | | | | satisfaction, with information you obtained while |
| that $30,000 grows each December due to | | | | investigating a prospective company, then your |
| inflation. You conclude that the best time to sell | | | | chances of creating a return on your investment |
| your stocks for a high return would be in the | | | | has greatly increased if you buy stock from that |
| month of December, sometime in the future. | | | | company. |
| How much money does the company require to | | | | |