WHAT PERSPECTIVE DOES THE BUDGET 2020 GIVE TO GHANA?

 

2020-Budget-Statement-and-Economic-Policy

WHAT PERSPECTIVE DOES THE BUDGET 2020 GIVE TO GHANA?

THAT IS THE QUESTION MOST GHANAIANS ASK THEMSELVES AFTER THE READING LAST WEEK.

NOW DON’T EXPECT FROM ME A COMPLETE ANALYSIS OF THE CA. 260 PAGES DOCUMENT – INCLUDED APPENDICES. YOU CAN DOWNLOAD THE WHOLE DOCUMENT AT THE BEGINNING OF THIS ARTICL E.

BUT APART FROM LISTING THE ACHIEVEMENTS OF THE GOVERNMENT WITHIN THE LAST THREE YEARS, THE BUDGET IS FULL OF PROJECTS FOR 2020 AND BEYOND. BE IT THE IMPROVEMENT OF THE RAILWAY INFRASTRUCTURE OR THE 1D1F INITIATIVE, ALL ARE VERY AMBITIOUS.

MOST OF THE ECONOMICAL DATA ARE POSITIVE AND IN LINE WITH THE RESEARCHES OF THE BANK OF GHANA. THE NEWEST IS THE CURRENT INFLATION RATE. AFTER THE REBASE OF THE UNDERLINED BASKET, THE RATE DECREASED FROM 7.8% TO 7.7% (SEE https://www.bog.gov.gh/) THIS IS ALREADY FURTHER BELOW THE INFLATION TARGET OF 8+/-2%.

THE GDP GROWTH IS SURELY WITHIN THE FORECAST OF INSTITUTIONS LIKE THE IMF OR THE WORLD BANK. SOME ARTICLES IN THE GHANAIAN PRESS DOUBT THAT TO ACHIEVE A TARGET OF 6.8% IS REALISTIC. ON THE OTHER HAND, THE INSTITUTIONS HAVE ALREADY DOWNGRADED THE ESTIMATE. THEREFORE, 6.8% GDP GROWTH SEEMS TO BE REALISTIC.

THERE ARE SOME COMPONENTS THAT MIGHT GIVE SOME PEOPLE A LITTLE HEADACHE. ONE OF THEM IS THE DEPRECIATION OF THE CEDI. AFTER SOME DAYS OF STABILISATION, THE CEDI LOST SOME GROUND AGAIN IN THE LAST DAYS.

NEVERTHELESS, I DON’T SEE ANY REASON TO PANIC RIGHT NOW. THE GOVERNMENT HAS INTRODUCED SEVERAL INITIATIVES THAT WILL MAKE SURE THAT WE MUST IMPORT LESS PRODUCTS. OF COURSE, THAT WILL PROBABLY LEAD TO PROTESTS OF SOME IMPORTERS. EVEN THE GOVERNMENT CANNOT MAKE EVERYONE HAPPY. BUT PROJECTS LIKE PLANTING FOR FOOD AND JOBS WILL LEAD TO MORE DOMESTIC PRODUCTION OF THINGS THAT ARE NEEDED HERE. THIS, IN TURN, WILL LEAD TO LESS EXPENDITURE OF FOREIGN CURRENCY, ESPECIALLY THE US-DOLLAR. AND THIS WILL SURELY STABILISE THE LOCAL CURRENCY.

FURTHERMORE, THE BFT ONLINE PUBLISHED AN ARTICLE TODAY. IN THIS ARTICLE, THE DIRECTOR OF ISSER EXPECTS THE GOVERNMENT TO MISS THE FISCAL DEFICIT TARGET. https://thebftonline.com/2019/economy/its-likely-govt-will-slip-in-deficit-target-prof-quartey/

THIS TARGET STANDS AT 4.7%, AND THE TARGET IS BASED ON THE FISCAL RESPONSIBILTY ACT. THE DIRECTOR BASES HIS OPINION ON THE ASSUMPTION THAT 2020 IS AN ELECTION YEAR. THIS, SO THE DIRECTOR, WILL PUT THE GOVERNMENT UNDER FISCAL PRESSURE. HE THINKS THAT IT WAS ALWAYS LIKE THAT IN ELECTION YEARS.

I REALLY DON’T KNOW WHY IT MUST BE LIKE THAT BECAUSE IT WAS ALWAYS LIKE THAT. THE GOVERNMENT IS NOW BOUND TO THE FISCAL RESPONSIBILITY ACT. WAIT AND SEE WHETHER THE GOVERNMENT KEEPS TO THE LEGAL BASIS. IF NOT, YOU CAN CRITICISE THE GOVERNMENT LATER.

I SEE THE MOST IMPORTANT PROBLEM FOR THE GOVERNMENT IN THE REVENUE GENERATION. HERE, THE GOBERNMENT WANTS TO BROADEN THE TAX BASE. THIS IS A GOOD START, AND WILL HOPEFULLY BE SUCCESSFUL.

SOME DISTRICTS HAVE ALREADY BOUGHT A SOFTWARE THAT TAXES MONIES AT THE SOURCE, IF THIS SOFTWARE IS IMPLEMENTED SUCCESSFULLY, IT WILL HELP TO CONTROL REVENUE COLLECTION AT THE BASE.

IN ALL, I AM OF THE OPINION THAT THE GOVERNMENT IS ON THE RIGHT PATH TO TRANSFORM THE ECONOMY. NOW IT’S THE TIME FOR THE POPULACE NOT ONLY TO BENEFIT FROM THIS TRANSFORMATION. GOVERNMENT, NO MATTER FROM WHICH PARTY, CANNOT DO ANYTHING WITHOUT THE SUPPORT OF THE PEOPLE.

WHAT PERSPECTIVE DOES THE BUDGET 2020 GIVE TO GHANA? THE BUDGET WILL ONLY GIVE THE PERSPECTIVE THAT YOU SUPPORT.

IT IS YOUR COUNTRY!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUSINESS MANAGEMENT FOR START-UPS – AN INTRODUCTION

starting-a-business-from-0-in-the-digital-era

BUSINESS MANAGEMENT FOR START-UPS – AN INTRODUCTION

WHY THAT?

I HAVE WATCHED A LOT OF SMALL AND MICRO BUSINESSES IN GHANA SINCE I AM RESIDENT HERE. ESPECIALLY, THERE WERE A NUMBER OF PETTY TRADERS AMONG THEM. MANY OF THEM COLLAPSE EVEN AFTER A FEW MONTHS. WHAT ARE THE REASONS BEHIND THE COLLAPSES? Continue reading “BUSINESS MANAGEMENT FOR START-UPS – AN INTRODUCTION”

WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?

 

WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?

THIS MORNING, I SAW AN INTERESTING BANNER HEADLINE IN THE “NEW DAY” PROGRAMME OF TV 3 GHANA. IT SAID THAT THE U.S.A. IS EXPLORING OPPORTUNITIES TO MAKE WEST AFRICA AN EXPORT OPPORTUNITY FOR AGRICULTURAL PRODUCTS. IT SOUNDS A LITTLE BIT RIDUCULOUS – A SIMPLE COMMENT. Continue reading “WEST AFRICA – AN EXPORT OPPORTUNITY FOR U.S. AGRIC GOODS?”

WHY IS ACCOUNTING NECESSARY FOR A SMALL BUSINESS?

WHY IS ACCOUNTING NECESSARY FOR A SMALL BUSINESS, AND HOW IS IT DONE? THE ANSWER TO THE FIRST PART OF THIS QUESTION YOU WILL SEE WHEN YOU ASK YOUR BANK FOR A LOAN. EVEN IF YOU ASK A RELATIVE FOR THE MONEY, THE PERSON WILL BE EAGER TO KNOW WHETHER HE/SHE WILL GET THE MONEY BACK.

SO, WHEN YOU ASK FOR MONEY FROM ANYWHERE – ESPECIALLY FOR A BUSINESS – PEOPLE WILL ASK YOU WHETHER YOU MAKE PROFIT. EVEN FOR YOU IT IS BETTER TO KNOW WHETHER YOUR BUSINESS IS PROFITABLE. IF NOT, YOU WILL EAT INTO YOUR CAPITAL – AND YOUR BUSINESS WILL COLLAPSE. THIS SCENARIO WILL THEN SURELY HAPPEN SOONER THAN LATER. (FOR BUSINESS STARTER, IT IS EVEN BETTER, IF YOU HAVE A SECOND SOURCE OF INCOME. AT THE BEGINNING, YOU CAN’T RELY ON YOUR BUSINESS MAKING ENOUGH PROFIT TO LIVE ON.)

SO, HOW WILL YOU DO YOUR ACCOUNTING? YOU DO NOT NEED TO MAKE IT VERY COMPLICATED. NOBODY WILL ASK YOU – AT THE BEGINNING – TO DO SOMETHING LIKE DOUBLE-ENTRY ACCOUNTING, ETC. OF COURSE, IF/WHEN YOUR BUSINESS BECOMES SUCCESSFUL, THIS WILL CHANGE IN THE FUTURE.

FOR NOW, A SIMPLE PLUS-MINUS CALCULATION WILL BE SUFFICIENT. THAT MEANS, YOU HAVE THREE COLUMNS. ONE IS FOR THE DATE,ONE FOR THE INCOME, AND ONE FOR THE EXPENSES. IN THE LEFT COLUMN, YOU WRITE THE DATE. IN THE MIDDLE COLUMN, YOU NOTE THE MONEY YOU RECEIVED, AND FOR WHAT YOU RECEIVED IT. IN THE RIGHT COLUMN, YOU WRITE HOW MUCH MONEY YOU SPENT, AND FOR WHAT YOU SPENT IT. AT THE END OF EVERY MONTH – OR PERHAPS EVERY WEEK – YOU SUM UP WHAT YOU RECEIVED AND WHAT YOU SPENT. READY IS YOU BOOKKEEPING FOR A MONTH.

NOW, FOLLOWING IS A BRIEF EXAMPLE FOR WHAT I JUST WROTE. LET US GUESS YOU SELL SECOND-HAND CLOTHES AND BAGS.:

DATE                                   INCOME                                EXPENSES
1.                                     20 (SALES OF 1 T-SHIRT)
5.                                                                                            15 (ELECTRICITY)
7.                                    50 (SALES OF 2 BAGS)
9.                                                                                           35 (RENT)
11.                                   15 (SALES OF 1 TROUSER)
15.                                  25 (SALES OF 1 BLOUSE)
23.                                 20 (SALES OF 1 T-SHIRT)
30.                                                                                         25 (SALARY)
TOTAL THIS MONTH 130                                            75
INCOME MINUS EXPENSE 130-75=55

THAT MEANS, IN THE RECORDED MONTH, YOU MADE A PROFIT OF 55.
GOOD JOB!

SO, THAT’S  WHY ACCOUNTING IS NECESSARY FOR A SMALL BUSINESS

IF YOU HAVE A FARM, CONSIDER A COOPERATIVE

A BRIEF INTRODUCTION TO AGRICILTURAL COOPERATIVES

 

IF YOU HAVE A FARM, CONSIDER A COOPERATIVE.

IN CASE YOU CONSIDER, YOU MIGHT WANT TO KNOW WHAT DEFINES A COOPERATIVE.

  1. A COOPERATIVE IS OWNED BY ITS MEMBERS. THESE MEMBERS FINANCE THE COOPERATIVE; THEY ARE ITS OWNERS AND CUSTOMERS AT THE SAME TIME.
  2.  IT IS A PRIMARILY A SERVICE PROVIDER FOR ITS MEMBERS, NOT TO SUPPLY ITS MEMBERS WITH DIVIDENDS.
  3.  A COOPERATIVE IS CONTROLLED BY ITS MEMBERS.
  4.  MEMBERS RECEIVE SHARES OF ANY PROFIT ACCORDING TO THEIR USE OF THE COOPERATIVE, NOT ACCORDING TO THEIR FINANCIAL CONTRIBUTION.
  5.  MEMBERS’ LIABILITY FOR DEBTS OF THE COOPERATIVE IS GENERALLY LIMITED TO THEIR FINANCIAL CONTRIBUTION.

THE ADVANTAGES OF AN AGRICULTURAL COOPERATIVE ARE THE FOLLOWING (AMONG OTHERS).

  1. THROUGH COOPERATIVES FARMERS MIGHT ACCELERATE THEIR COLLECTIVE INCOME ON THE MARKETS.
  2.  FARMERS CAN HAVE A BETTER ACCESS TO EQUIPMENT TO TOIL THEIR FARMS.
  3.  THEY CAN HAVE AN EASIER ACCESS TO CREDIR FACILITIES THROUGH THEIR COOPERATIVE.
  4.  THERE IS THE POSSIBILITY OF GETTING BETTER ACCESS TO THE GLOBAL MARKET PLACE BY THE COOPERATIVE USING TECHNOLOGICAL MEANS.

OF COURSE, THERE ARE ALSO DISADVANTAGES OF COOPERATIVES COMPARED WITH HANDLING YOUR OWN FARM SINGLE-HANDEDLY.

THE DISADVANTAGES MOSTLY LIE IN A MORE BUREAUCRATIC EFFORT IN DEALING WITH A COOPERATIVE, FIRST OF ALL, YOU MUST REGISTER A COOPERATIVE SIMILARLY TO A CORPORATION. FURTHERMORE, THE DECISION-MAKING PROCEDURE IS LONGER, BECAUSE THE MEMBERS MUST DECIDE COLLECTIVELY ON IMPORTANT MEASURES. THEY MUST GET AT LEAST A MAJORITY DECISION. LASTLY, THERE MIGHT OCCUR CASES IN WHICH THERE ARE DIFFERENT OPINIONS AMONG MEMBERS. THESE DIFFERENT OPINIONS MIGHT LEAD TO SEVERE PROBLEMS WITHIN THE COOPERATIVE.

BUT YOU MUST ALSO CONSIDER THAT THESE DIFFERENT OPINIONS MIGHT ALSO OCCUR WITHIN YOUR OWN FAMILY. IN CASE YOU WORK ON A FAMILY FARM, YOU COULD HAVE QUARRELS WITH YOUR PARENTS, YOUR SIBLINGS, YOUR HUSBAND OR WIFE. YOU HAVE TO SOLVE ALL THESE QUARRELS. CONSIDER THE COOPERATIVE AS YOUR FAMILY. IN THE COOPERATIVE FAMILY, YOU ALL MUST BALANCE DIFFERENT OPINIONS FOR THE SAKE OF THE OVERALL GOOD.

IF THIS ARTICLE GIVES YOU THE IDEA THAT IF YOU HAVE A FARM, YOU CONSIDER A COOPERATIVE, THEN DO THE FOLLOWING. DOWNLOAD THE BOOK AT THE BEGINNING OD THIS ARTICLE, AND READ IT. THE BOOK IS WRITTEN FOR ESTABLISHING COOPERATIVES IN THE U.S.A. BUT APART FROM THE LEGAL IMPLICATIONS, YOU CAN USE THIS BOOK FOR THE AFRICAN ENVIRONMENT, TOO.

AFTER THAT, YOU MIGHT THINK A COOPERATIVE IS THE RIGHT THING FOR YOU, BUT YOU HAVE MORE QUESTIONS. DISCUSS THE ISSUE OF AN AGRICULTURAL COOPERATIVE WITH PEOPLE WHO MIGHT HAVE THE SAME INTERESTS.

IF YOU THEN HAVE MORE QUESTIONS, YOU CAN CONTACT ME THROUGH “ENQUIRIES” ON THIS WEBSITE. YOU CAN ALSO CONTACT ME THROUGH recklingenterprises@hotmail.com OR MY WHATSAPP NUMBER 0200523362. (FOR PEOPLE OUTSIDE GHANA, IT IS +233200523362.)

BUILD MORE COOPERATIVES FOR A BETTER AGRICULTURAL BASE IN GHANA AND THE WHOLE OF AFRICA!

 

THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA

WORLD DEVELOPMENT REPORT 2020

THE WORLD BANK HAS JUST PUBLISHED THE WORLD DEVELOPMENT REPORT 2020.(YOU CAN DOWNLOAD THE REPORT AT THE BEGINNINF OF THIS ARTICLE.) IN THIS REPORT, THE WORLD BANK DISCUSSES THE USE OF GLOBAL VALUE CHAINS (GVC), ESPECIALLY FOR DEVELOPING ECONOMIES. GLOBAL VALUE CHAINS DEMAND MORE INTERNATIONAL COOPERATION. ON THE AFRICAN CONTINENT, THIS REGIONAL INTERNATIONAL COOPERATION WAS RECENTLY INITIATED THROUGH THE AFRICAN CONTINENTAL FREE TRADE AREA (AfCFTA). WHAT IS THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA? Continue reading “THE IMPORTANCE OF AfCFTA FOR GHANA AND AFRICA”

BUSINESS CONSULTANCY WITH GHANA RESEARCH

BUSINESS CONSULTANCY WITH GHANA RESEARCH

DO YOU HAVE A SMALL OR MICRO BUSINESS, AND YOU HAVE PROBLEMS MANAGING IT FINANCIALLY OR OTHERWISE?

OR YOU WANT TO ESTABLISH A SMALL OR MICRO BUSINESS, AND YOU HAVE PROBLEMS DOING THAT?

DON’T WORRY, I’M SURE I CAN HELP YOU. JUST GO TO www.ghanaresearch.org AND CLICK ON “ENQUIRIES” UNDER “PAGES”. FILL THE COMTACT FORM WHICH IS SHOWN THERE, AND CLICK ON “SUBMIT”. I WILL GET YOUR ENQUIRY THEN. BE ASSURED THAT YOU WILL HAVE AN ANSWER FROM ME WITHIN TWO (2) DAYS – EVEN WEEKENDS AND PUBLIC HOLIDAYS.

THIS ANSWER MIGHT BE A SOLUTION TO YOUR PROBLEM, OR ONE OR MORE QUESTIONS. THE LATTER MIGHT APPEAR NECESSARY IF YOUR QUESTION NEEDS MORE CLARITY OR ADDITIONAL INFORMATION.
THIS ASSISTANCE I OFFER IS COMPLETELY FREE. I KNOW THAT OWNERS OR PERSPECTIVE OWNERS OF SMALL AND MICRO BUSINESSES HARDLY HAVE ANY MONEY LEFT. ONLY IF MY INVOLVEMENT DEMANDS FURTHER NEGOTIATIONS WITH THIRD PARTIES, I WILL CHARGE YOU A SMALL FEE TO COVER MY COSTS. FOR ANY FEES AND OTHER COSTS OF THIRD PARTIES LIKE BANKS, ETC., YOU ARE RESPONSIBLE YOURSELF.

YOU CAN BE SURE THAT ALTHOUGH MY CONSULTANCY IS BASICALLY FREE, I WILL DO MY VERY BEST TO MAKE YOUR BUSINESS SUCCESSFUL. BUT YOU MUST KEEP IN MIND ONE IMPORTANT ISSUE. THE ONLY ONE WHO IS RESPONSIBLE FOR THE SUCCESS OF YOUR BUSINESS IS YOU.
ESTABLISHING A BUSINESS NEEDS DISCIPLINE AND HARD WORK. PEOPLE CAN HELP YOU DOING IT. BUT ONLY YOU ARE THE ONE WHO AT THE VERY END DECIDES SUCCESS OR FAILURE OF YOUR BUSINESS.

SO, I WILL ALWAYS BE THERE FOR YOU IF YOU NEED ME. BUT FINALLY, DO NOT BELIEVE IN ME, BELIEVE IN YOURSELF.
I AM EAGER TO HEAR FROM YOU SOON, AND I WISH YOU GOOD LUCK IN ALL YOUR ENDEAVOURS TO SEEK LONG-LASTING SUCCESS.

BUSINESS CONSULTANCY WITH GHANA RESEARCH

SEE YOU!

START SAVING A CERTAIN PERCENTAGE OF YOUR INCOME

START SAVING A CERTAIN PERCENTAGE OF YOUR INCOM

MANY PEOPLE GIVE 10% OF THEIR MONTHLY INCOME TO THE CHURCH – THE SO-CALLED TITHE. BUT APART FROM THE SPIRITUAL WELFARE, THE PHYSICAL WELFARE IS ALSO OF IMPORTANCE. THIS IS ESPECIALLY TRUE FOR SAVING FOR RETIREMENT AND/OR UNFORESEEN EXPENSES LIKE HEALTH ISSUES. SO, HOW MUCH SHOULD YOU SAVE FOR THESE SPECIAL EVENTS IN YOUR LIFE? Continue reading “START SAVING A CERTAIN PERCENTAGE OF YOUR INCOME”

ON WARREN BUFFETT’S INVESTMENT TENETS

AS THE GHANA STOCK EXCHANGE  (GSE) CONTINUED ITS WAY DOWNWARD, I’LL START MY OVERVIEW NOW HOW TO BUY STOCKS THE WAY WARREN BUFFETT DOES. FIRST OF ALL, AND THAT IS A GENERAL PRINCIPLE, BUY STOCKS IN THE WAY YOU WOULD BUY YOUR OWN BUSINESS.. FURTHERMORE, FOLLOW THE PRINCIPLES (TENETS) LISTED BELOW AND IN FUTURE ARTICLES. THERE ARE FOUR GROUPS OF TENETS: BUSINESS, MANAGEMENT, FINANCIAL, AND VALUE. I WILL  START WITH THE PRINCIPLES (TENETS) CONCERNING THE BUSINESS.

  • YOU SHOULD ONLY BUY A BUSINESS THAT IS SIMPLE AND UNDERSTANDABLE

FOR SEVERAL YEARS, WARREN BUFFETT REFUSED TO BUY INTERNET STOCKS LIKE FACEBOOK AND GOOGLE. ALSO RELATED STOCKS LIKE APPLE WERE NOT ON HIS LIST. THE REASON FOR HIS NON-COMMITMENT TO THESE STOCKS WAS, AS HE SAID, THAT HE DIDN’T UNDERSTAND ANYTHING ABOUT THESE STOCKS. THAT CHANGED IN THE LAST YEARS, AS HE BOUGHT SHARES IN GOOGLE. THIS MIGHT BE BECAUSE HE MORE AND MORE PASSED DECISION-MAKING OVER TO PEOPLE HE TRUSTS. THOSE PEOPLE MIGHT UNDERSTAND MORE ABOUT THE SO-CALLED FAANG STOCKS (FACEBOOK, APPLE, AMAZON, , NETFLIX, GOOGLE) THAN HE DOES.

BUT THE PRINCIPLE STILL STANDS, YOU SHOULD ONLY BUY STOCKS IN COMPANIES YOU UNDERSTAND. THIS UNDERSTANDING INCLUDES THE BUSINESS MODEL AS WELL AS THE ENVIRONMENT IT OPERATES. AT THE LONG RUN, THE SUCCESS OF YOUR INVESTMENT DEPENDS ON THE SUCCESS OF THE COMPANY IN THE FUTURE. TO ACHIEVE YOUR SUCCESS, YOU MUST ANALYSE THE BUSINESS VERY WELL. AND TO ANALYSE THE BUSINESS VERY WELL, YOU MUST UNDERSTAND IT. SO EASY IT IS…

  • HOW DID THE BUSINESS PERFORM (OPERATE) IN THE PAST?

IT IS ALWAYS DIFFICULT, IF NOT IMPOSSIBLE, TO PREDICT THE FUTURE PERFORMANCE OF A COMPANY. BUT AT LEAST, THE PAST PERFORMANCE WILL GIVE YOU A HINT FOR THE FUTURE. OF COURSE, IT DOESN’T HELP JUST TO LOOK AT THE LAST ANNUAL REPORT. THE FACT THAT THESE NUMBERS MIGHT BE POSITIVE SURELY DOESN’T SAY ANYTHING ABOUT THE FUTURE. YOU SHOULD BE ABLE TO DEVELOP A SUSTAINABLE TREND  IN THE PERFORMANCE OF THE COMPANY.OF MUCH IMPORTANCE IS – OF COURSE, BUT NOT ONLY – A THOROUGH ANALYSIS OF THE FIGUES PRESENTED IN THE LAST TEN YEARS.

BUT YOU SHOULD ALSO LOOK – AS I SAID BEFORE – AT THE ENVIRONMENT IT OPERATES. IT MIGHT BE THAT ECONOMICAL OR POLITICAL EVENTS IN THE PAST INFLUENCED THE COMPANY’S RESULTS POSITIVELY OR NEGATIVELY.THESE EVENTS MUST BE TAKEN INTO CONSIDERATION WHEN JUDGING THE COMPANY’S PERFORMANCE. THAT’S WHY IT IS IMPORTANT TOUNDERSTAND THE BUSINESS, AS I MENTIONED UNDER POINT 1).

  • WILL THE BUSINESS – GIVEN A THOROUGH ANALYSIS – HAVE A POSITIVE DEVELOPMENT IN FUTURE?

AS I SAID BEFORE, IT IS VERY DIFFICULT TO FORESEE THE FUTURE PERFORMANCE OF A BUSINESS. BUT IF YOU LOOK AT THE FINANCIAL STATEMENTS (BALANCE SHEET, PROFIT/LOSS STATEMENT, CASH FLOW STATEMENT, ETC.) INTENSIVELY, YOU WILL SURELY COME TO A CONCLUSION. YOU MUST, OF COURSE, PUT THE FIGURES INTO A RIGHT PERSPECTIVE.THERE ARE CERTAIN RATIOS WHICH WILL GIVW YOU THE RIGHT PERSPECTIVE. THESE ARE, FOR EXAMPLE:

  1. PRICE/EARNINGS RATIO (THE RELATION BETWEEN THE PIECE OF A SHARE AND THE EARNINGS PER SHARE);
  2. DEBT RATIOS (HOW THE COMPANY WILL BE ABLE TO DEAL WITH ITS DEBTS);

OF COURSE, THIS LIST IS NOT COMPLETE. FURTHER RATIOS AND WAYS TO FIND OUT WHETHER A COMPANY IS SECURE TO BUY, YOU’LL FIND IN GRAHAM’S “SECURITY ANALYSIS”. YOU CAN DOWNLOAD THIS BOOK ON TOP OF THIS ARTICLE.

NEXT WEEK, I’LL DISCUSS BUFFETT’S MANAGEMENT TENETS. STAY TUNED!