Ten Questions That You Should Ask Prior to Purchasing a Stock The first thing
that you should understand is how the company earns money. Just because everyone
else is buying the stock and the price has run up tremendously does not mean
that you should also be jumping on the band wagon. I suggest that you review the
annual report to see the statement of cash flow. Are net earnings increasing
while cash is declining? This could be a warning sign that the company could be
manipulating the net income. Every company earns money differently. If you don't
review the financial reports you may not understand the industry that the
company is operating in. For example, when you hear the name General Motors you
may immediately conclude that their earnings are tied to the auto industry.
However, a closer examination of their financial report will reveal that over
50% of the company profits come from GMAC financing. This wholly owned
subsidiary earns money by lending in the financial
markets. Therefore, the earnings of GM are tied more closely to the banking
industry.


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+to+Purchasing+a+Stock.html



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