Ask Colin

With respect to fundamentals of a company in short which are the most important to look at when assessing a company's viability? Could I also ask where is the best place to find such information?

The most important are:

Does the company have sufficient working capital? For this use the Current Ratio. It is very important. Most company failures are because the company runs out of cash. Look for trends as well as absolute levels.

While on cash, the Cash Flow Statement will tell you a lot about what is happening. Look for positive operating cash flow. If there isn't, understand why. Look at the movement of cash item by item.

Debt to Equity is an important indicator of financial risk. 50% or less is usually OK, except in very cyclical industries. Over 100% needs a careful look. However, it depends on the industry and what the company might be doing to redress the situation.

Then there is profit. Any company not making a profit may have problems down the track.

There is a lot more than this. If you want to learn it, take the SIA Graduate Diploma In Applied Finance and Investment subjects.

The information is in company reports. Many of them are now on the Internet. Get the addresses from the ASX web site. If the reports are not on a web site, phone the company and ask for the report to be sent to you. Their contact numbers are on the ASX web site.

One of the best measures of financial health available to private investors seems to be the Stock Doctor system. See www.stockdoctor.com.au. It costs, but it may save you thousands of hours of research.

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