How to write a company analysis

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With accurate tabulations of incoming revenue and level-headed assessments of market challenges, company analysis reports have become almost indispensable to many market-watchers. Before investors infuse money into publicly traded companies, they want some sense of the company's well-being. This means they need to know the state of the company's current health; they want to understand, for example, how the company rebounded after a drop in revenue or whether its cash flow is impeded by customers who don't pay on time. Snapshots of a company's strengths and weaknesses provide investors with facts they need to make informed decisions.

Write an introduction. Identify the company and describe its key operations. Summarise its history, stating how and when it started and by whom. Highlight any major achievements.

Call the next section "Key Focuses." Tell readers the report analyses three major company characteristics: management, financial health and indicators of growth. Explain how each topic can help predict the company's future performance.

Continue with a section called "Key Findings." Divide the section into four sub-headings: strengths, weaknesses, opportunities and threats. List the report's major findings beneath each sub-heading. For example, findings under "strengths" might be how the company leads the industry as a major retailer that has captured national attention for offering high-quality products at moderate prices.

Discuss the first major company characteristic, management. Paraphrase information from the company's annual report (an annual summary required for public corporations) or from the human resources department (for private companies) that characterise the company's leaders based on salaries, age and amount of stock ownership.

Move on to the second characteristic, financial health. List the financial statements reviewed by title and date, then describe key findings.

Continue discussing the company's financial health by creating a sub-section for "Cash Flow." Explain how daily operations generate cash flow. Point out earnings reported but not yet confirmed by explaining that sales reported do not always mean money has been collected.

Create another sub-section under financial health called "Financial Ratios." Analyze ratios such as profitability (gross, net and operating), leverage (debt), coverage (interest earned), liquidity (obligations) and efficiency (managing assets). Describe results from examining trends in ratios over time and from comparing results reported by other companies.

Conclude the company analysis with a section for the third characteristic, indicators of growth. Interpret how findings from the management and financial health sections either suggest the company is set for growth or is likely to suffer a setback. Point out which key initiatives (such as a new customer-service campaign or new products) have been successful or not.

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