ELEVEN QUESTIONS THAT CAN AFFECT YOUR FUTURE FINANCIAL SECURITY Adapted from Fortune, December 22, 2003 Content by Ralph Seger (c) Ralph Seger. All Rights Reserved. Reproduced with permission and distributed by StockCentral.com

2 1. DO YOU UNDERSTAND THE BUSINESS? If you don’t understand the business model, then pass it up.If you don’t understand the business model, then pass it up. If the annual report resembles a small phone book, it probably can’t be understoodIf the annual report resembles a small phone book, it probably can’t be understood

3 2. IS THE ACCOUNTING REAL? Are revenues real ?Are revenues real ? Does cash flow growth follow sales growth?Does cash flow growth follow sales growth? Does the company repeatedly report non recurring write offs?Does the company repeatedly report non recurring write offs?

4 3. ALWAYS MAKE A COMPARISON TO COMPETITORS How is year over year growth?How is year over year growth? For retail companies, same store or comparable store sales is the name of the gameFor retail companies, same store or comparable store sales is the name of the game

5 4. IS THE COMPANY SENSITIVE TO CHANGES IN THE ECONOMY? What happens to profit margins when the economy heads South?What happens to profit margins when the economy heads South? Remember that investing in a cyclical company is akin to trying to time the market.Remember that investing in a cyclical company is akin to trying to time the market. Trying to time the market never works more than once, if then. Trying to time the market never works more than once, if then.

6 5. WHAT IS THE WORST THING THAT COULD HAPPEN? Be wary of dependence on a single or a few customers.Be wary of dependence on a single or a few customers. What is the trend of economics and politics that affects the company?What is the trend of economics and politics that affects the company?

7 6. IS MANAGEMENT COOKING THE BOOKS? Repeated non recurring but recurring charges makes it impossible to figure out how profitable is the businessRepeated non recurring but recurring charges makes it impossible to figure out how profitable is the business

8 7. WHITHER DEBT? Long-term liabilities eventually come up to “bite you”.Long-term liabilities eventually come up to “bite you”.

9 8. HOW DO YOU TELL IF THE COMPANY IS WELL-MANAGED? Has the management team been consistent in several years of annual reports?Has the management team been consistent in several years of annual reports? Is their message consistent?Is their message consistent? Or is the strategy repeatedly being switched, with poor results blamed on others?Or is the strategy repeatedly being switched, with poor results blamed on others?

10 9. WHAT IS THE STOCK REALLY WORTH? What is the forward P/E ratio, based on analyst’s estimate of E/S 12 months in the future, compared to the adjusted average P/E ratio and as a % of the EPS growth rate?What is the forward P/E ratio, based on analyst’s estimate of E/S 12 months in the future, compared to the adjusted average P/E ratio and as a % of the EPS growth rate?

DO YOU REALLY NEED TO OWN THIS STOCK? Will this stock contribute to your future financial security and fit in with your investment objectives?Will this stock contribute to your future financial security and fit in with your investment objectives?

DON’T LET YOUR EMOTIONS RUN WILD Avoid the herd mentalityAvoid the herd mentality Avoid emotional trapsAvoid emotional traps