SAMPLE LIST OF QUESTIONS FROM BURKENROAD LATIN AMERICA STUDENTS TO COMPANY MANAGEMENT

OPERATING ACTIVITIES (Please note that answers to many of these questions are publicly available.)

1. What are the primary segments of the company?
1. Describe the locations for these segments.
2. Are there disadvantages for these locations?
3. Describe the target markets for each segment of the company.
2. Are there any new ventures planned, either expansion of existing segments or new segments?
1. What stage is this venture in (R&D, prototype, operational?)
2. Does the company have ongoing research and development? What are the expected expenditures in the next 24 months?
3. Describe expected milestones and completion dates.
4. What is the potential in terms of contribution to gross profits?
5. How will new ventures or expansions affect other operating costs?
6. What is the nature of the venture (joint venture, internal expansion, acquisition?)
3. What are managements’ profitability goals?
1. What are the major risks the company faces in generating sufficient sales to meet profitability goals?
2. What are the worst case and best case scenarios?
4. What does management see as the major factors to consider in forecasting earnings for the company?
5. Are there important public documents in recent months other than the annual and quarterly reports?
6. Is any litigation pending? Are there any product liability issues?
7. Are product changes or innovations expected?
1. What is the timeframe for these changes or innovations?
2. What is the cost and timing of costs?
3. How will these changes affect sales volume and pricing?
8. Are there any plans for downsizing?
9. Who are the customers for each market?
1. Assess the financial health of the customers of each segment.
2. Is the company at risk in terms of the number of customers in each segment?
3. Is accounts receivable turnover expected to change?
4. What are the credit terms for customers?
10. Breakdown the revenues and operating costs for each segment. Is operating profit consistent over time? Explain variations. Are variations in profitability expected in the future?
11. Describe the competitors for each segment.
1. What share of the market does the company have for each segment?
2. Will overall demand for the product or service change in the next 24 months?
3. What is management’s competitive strategy for each segment for the next 24 months?
4. What are the strengths and weaknesses of the competition for each segment?
5. Are key ratios for the company the same as for its competitors? If not, why?
12. Is the company affected by government regulation?
1. Which expenses are affected by government regulation?
2. Which revenues are affected by government regulation?
3. Are changes in government regulation expected?
13. Is the company engaged in international operations?
14. Does the company have long-term contracts? Is there a sample contract that you can read? What are the key terms in these contracts and how do these terms affect the financial reports. If you do have long-term contracts, review material related to accounting for long-term contracts (percentage of completion method) in any financial statement analysis or intermediate accounting textbook.
15. If the company is an oil and gas exploration company, what method of accounting is used? Review material related to accounting for oil and gas exploration in any financial statement analysis or intermediate accounting textbook.
16. Are revenues constrained by physical capacity?
1. Describe the fixed asset investment required for the segments of the business, e.g., required buildings, property and equipment.
2. Review the historical fixed asset turnover ratio. Are changes expected in the future?
17. What are the primary operating costs?
1. Do the footnotes provide additional detailed information regarding the nature of these costs?
2. What are the primary components of cost of sales for each segment?

i. Are costs for any of these primary components expected to change – either direct costs or overhead costs?

ii. Is inventory turnover expected to change?

iii. Does the company expect any change in labor costs included in the cost of sales?

3. What are the primary costs included in selling, general and administrative costs?

i. Are costs for any of these primary components expected to change?

ii. What are the salaries of key executives?

iii. Are advertising expenses expected to increase? How much has been spent on advertising historically?

18. What are the primary keys for operational success in this industry?
19. Any recent changes or expected future changes (e.g., retirement, etc.) in key management or board of directors?

INVESTING ACTIVITIES (Answers should reference the section of the 10-K or quarterly report that is used to answer these questions. If alternative secondary sources are used, this should be noted.)

20. What is a capital maintenance level of investment?
21. Are there any planned acquisitions?
22. Are there any planned divestitures?

FINANCING ACTIVITIES (Answers should reference the section of the 10-K or quarterly report that is used to answer these questions. If alternative secondary sources are used, this should be noted.)

23. Describe the short-term financing opportunities for the company.
24. Describe the long-term debt of the company.
25. Will there be debt or equity offerings in the future?
1. Timing?
2. Amount?
3. Purpose?
4. Rates and terms?
5. How does this new financing help the company achieve short-term and long-term goals?
6. Is new financing related to specific ventures or expansion plans?
26. Will the terms of either short-term or long-term debt change, e.g., interest rate?
27. When will the current debt mature?
28. Compare the debt/equity ratios of the company to those of competitors.