The key variables indicating the basic long term earning power of the company are analyzed. Additionally, consistency and trend of core earnings, earnings mix and capacity for internal growth are also covered.

The specific issues include:

• Consistency and trend of core earnings.
• Earnings mix by activity and geography.
• Exceptional and extraordinary items: non-recurring impacts on past earnings levels.
• True earnings levels available for cash flow: equity accounting, restrictions on profit repatriation.
• Internal growth versus acquired earnings.
• Profitability and protection measures.
• Profit margins.
• Interest & pre-tax coverage measures.
• Dividend cover, payment levels and future policy.
• Taxation situation: effective tax rate, specific reliefs, unutilized losses.
• Sufficiency of retained earnings to finance growth internally.