What is the primary reason understanding a company's business is crucial for long-term stock investments?

To predict short-term stock price movements To gain conviction and hold the investment during market downturns To identify companies with a history of consistent dividend payments To determine the optimal time to sell the stock for maximum profit

According to the text, what are the three stages of the 'limited resource' equity research process?

Financial analysis, Market research, Valuation Understanding the Business, Application of the checklist, Valuation Technical analysis, Fundamental analysis, Sentiment analysis Industry analysis, Competitive analysis, SWOT analysis

What is the recommended minimum Gross Profit Margin (GPM) for a company to be considered as a potential investment, as per the checklist?

10% 15% 20% 25%

Why is a high level of debt generally considered unfavorable when evaluating a company for investment?

It indicates the company is highly profitable and reinvesting its earnings It suggests the company is using debt strategically for growth and expansion It signifies high financial leverage, which can be risky, and the finance cost reduces earnings It demonstrates the company's ability to secure favorable financing terms from lenders

What does a consistently positive cash flow from operations indicate about a company?

The company is effectively managing its working capital The company's core business operations are generating cash and are likely successful The company is heavily reliant on external financing to fund its operations The company is aggressively investing in research and development

What does Return on Equity (ROE) measure?

The company's profitability relative to its sales revenue The efficiency of the company's asset utilization The return generated by the company in relation to shareholder equity The company's ability to generate cash from its operations