ANALYZING A COMPANY’S BACKGROUND
Objective: To pick a company to analyze, collect background information and start thinking about the narrative for the company.
Key Steps
1. Choose a company that you want to work at, understand, or own. Consequently, the company can be of any size, in any sector, but it must be listed in the Nairobi securities exchange (NSE).
2. Collect information, both financial and nonfinancial, about the company and the sector that it operates in.
3. Establish your prior views of this company. Put differently, given what you know now about the company (which may be based on limited information or even hearsay), evaluate whether you think that this company is a well-managed, good company or a poorly managed mess.
Framework for Analysis
a. Collect information about the company. Start with the annual reports (three to five years), for a publicly traded company.
b. carry out an analysis focusing on:
1. Business Environment and Strategy Analysis
2. Accounting Analysis
3. Financial analysis focusing on three broad areas—profitability analysis, risk analysis, and analysis of sources and uses of funds.
4. Prospective Analysis based on different financial analysts sentiments. (no calculations expected)
