Word bank: number · one-paragraph · questions · single

1. Six : model, margins, owns/owes, cash, moat, risks.
2. No number tells the whole story.
3. Back every claim with a .
4. End with an honest summary.

1. Company X has a 40% net margin but $5 million in debt due next year and only $500,000 in cash. Company Y has a 10% net margin, no debt, and plenty of cash.

   1. Which statement is most reasonable?

   • A. Company X is obviously safer because of its margins.
   • B. Company X may face near-term risk despite high margins, because of its debt and low cash.
   • C. Company Y is failing because its margins are lower.
   • D. Margins are the only thing that matters.

2. 2. Which question does the balance sheet help you answer?

   • A. What does the business own and owe?
   • B. What's the company's logo?
   • C. How many followers does it have?
   • D. What will next year's stock price be?

3. 3. A strong business analysis names the biggest risks, not just the strengths.

   True/False

1. 1. List the six questions in the business analysis framework.

2. 2. A company has $400,000 in revenue and $32,000 in net income. Write one sentence about its margins, backed by a number.

1. 1. Pick a real company you know. Answer the six questions as best you can.

2. 2. What's the hardest of the six questions to answer from the outside? Why?