Qualitative Analysis

The key question of the qualitative assessment of a company is:

 

What are the advantages of an enterprise which enable it to achieve sustained above-average returns?

 

In financial terms, the ability to generate regular above-average returns finds its expression in the continuous generation of free cash flow (or in financial companies in the creation of surplus capital). Companies are able to do so if they fulfil all or in part these conditions:

 

  • They have an outstanding market position based on lasting competitive advantages
  • The management is committed to the long-term success of the company
  • Short-term success is not achieved at the expenses of employees or the environment or by questionable accounting methods.
  • Global megatrends favour the development of a company

 

The following factors have proved meaningful for judging countries concerning their quality as a debtor or their attraction as a location for business:

 

1. Budget deficits and shadow budgets

2. Current account balance and currency system

3. Demography and sustainability of social systems

4. Political and legal stability