Finances

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Measuring the Operating and Financial Health of the Business

• What are the fundamentals of the business?

• What are the operating metrics of the business that you need to monitor?

• What are the key risks the business faces?

• How does inflation affect the business?

• Is the business’s balance sheet strong or weak?

• What is the return on invested capital for the business?

Evaluating the Distribution of Earnings (Cash Flows)

• Are the accounting standards that management uses conservative or liberal?

• Does the business generate revenues that are recurring or from one- off transactions?

• To what degree is the business cyclical, countercyclical, or recession-resistant?

• To what degree does operating leverage impact the earnings of the business?

• How does working capital impact the cash flows of the business?

• Does the business have high or low capital- expenditure requirements?