How to analyze a company__After identifying the right sector to park your money in, you should get your hands on the right company. Some parameters that will help you analyze a company.________________________________________After you have decided that it is the right time to invest and identified the right sector in which to park your money, you should get your hands on the right company. As Peter Lynch says, “Identifying the right industry but the wrong company is like marrying into the right family but the wrong girl.” Here are eight financial and three non-financial metrics you should look at when investing in a company. Return on Invested Capital: Refers to the amount earned by the company on the total funds employed in the business. By capital we mean both own capital and loan capital. Share capital would obviously also include reserves. The return would mean after-tax profit plus interest on long-term funds, adjusted for taxes. This measures the productivity of money and is the closest measure to discovering the underlying economics of the company. The higher the ROCE, the better it is for the investor. At a minimum, ROCE should equal the company's weighted average cost of capital (WACC). WACC is the rate of return that equity shareholders and debt holders combined want to earn. Return on Equity: Return on equity measures the total return earned on the invested shareholder fund. It is the ratio of profit after tax to shareholders' funds. Over the long term, a company's value would move in step with its return on equity. The higher the ROE, the better it is for investors. Typically, ROE is higher than ROCE because the cost of debt is generally lower than ROCE, resulting in shareholders enjoying a larger share of the total return pie. Historical Sales Growth: Indicates how the company has been able to grow its business over the years. the long term. Compared to the industry growth rate, this would give an indication of whether the company is increasing its market share or not. Furthermore, it would help to find out whether the business is in growth or maturity stage and to understand the seasonality of the business and hence interpret the growth of the recent past. Free cash flows for shareholders: doing business is not about accounting for accounting profits; therefore the cash surplus is more important than the accounting surplus. Free cash flow is found by deducting upcoming maintenance capital expenditures from cash from operations.