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Questions to Ask Before You Buy a Stock

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Before a person buys a stock he or she needs to conduct proper research on stocks and the general stock markets and how stock markets work. Gathering enough information is crucial in every aspect of everyday life. However, having enough information when dealing with buying stocks is of crucial importance for every person who has or does not have any previous experience in conducting business on stock markets. In order to help those people this article with provide several question that might make the process of researching easier.

What Does the Company Do?

Before you decide to buy a stocks of certain company make sure that you actually know what the company is doing. There is no point in buying stocks of certain company and not knowing what does that company do. Make sure that you are familiar with the annual financial reports of the company whose stock your are considering buying. Being familiar with every aspect of the given company is the road that will take you to the successful purchase of that company's stocks. In order not to regret buying the stocks of certain company you need to be able to be very familiar with what does that company do.

Does the Company Make Profit?

The second question actually is very connected to the first one. In the research on the company make sure that you get answers about the profitability of that company. You do not want to buy stock of some company whose records show that it did not made profit in recent time. If that is the case the buying of stocks of that company will mean that there is a strong possibility that you will lose certain amount of your money.

Who are the Competitors of the Given Company in the Market?

Research the competition of that company before you make a decision to buy the stocks of that company. While looking for the answer on this question try also to get the information what is the share of this company in that industry market and whether that industry is dominated by one company and if there are possibilities or signs that that company might increase its shares in that market. Besides domestic competitions, make sure to gather information and to research foreign competition as well because in majority of cases those foreign company are conducting business for less money in order to break through to the foreign markets.

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What does the Company's 10-K and 10-Q Annual Report Indicate?

10-K and 10-Q are more detailed reports that show whether the company was profitable or not during the last year. The 10-K report is an annual report that companies are obliged to file and it can provide you with additional information that might prove useful for you in regards to deciding whether or not to buy stocks from that company. 10-Q is very similar to 10-K but it focuses more on the quarterly period and they are filed on a quarterly bases and as such they provide you with more details about the company.

Who is Managing the Company?

Knowing who runs the company and how that management is running the company is very useful when deciding whether or not to buy stocks of that company. Since majority of people do not have the opportunity to walk into the company and talk to the management in order to get the adequate information. However, that is not the only way to get that information. One way to get those information is to visit their Web page and to look for those information. Any company who is having success will have the names and biographies of the management on their web page. Besides this, Internet also provides you with the opportunity to search for articles about the company's management and in that way you will have the opportunity to see what other people are saying about the management and that company.

Before you actually purchase stocks of certain company make sure that you have answers to these questions and on every other question that you might think of that might influence your decision. Do not be afraid to ask those questions because your money is on stake and although you might end up with gaining a lot money by purchasing those stocks you might still end up with losing a lot of money and that is something that nobody of us wants to be dealing.