ABCDEFGHIKLMNOPQRSTUVWXYZ
1
Rule Maker Essentials
2
3
There seems to be some perverse human characteristic
4
that likes to make easy things difficult. - Warren Buffett
5
6
We Fools love Mr. Buffett's pithy quotes. Is it a coincidence that Buffett -- one of the most
7
successful investors of all time -- hails not from Wall Street, but from America's heartland --
8
Omaha, Nebraska? We think not. Buffett shuns Wall Street's bewildering ways. And, so
9
should you, Fool. Buffett's success is the result of his rational assessment of businesses.
10
Believe it or not, finding great companies is not complicated! Easy -- no; but, simple -- yes.
11
12
If you're new to Rule Maker investing, this spreadsheet is for you. By inputing some
13
basic financial data and answering a few questions, you'll quickly be able to tell whether a
14
company is a cash-generating, industry-dominating, wealth-creating powerhouse -- what
15
we call a Rule Maker.
16
17
Directions: We've identified 11 general attributes of Rule-Making companies. Part 1
18
covers five qualitative aspects of a business. For each of these, the scoring is simple --
19
1 point if the attribute is met, 0 points if it's not. Part 2 covers six financial criteria. Since
20
these are more objective, each is worth 2 points if met, 0 points if not. Altogether, that's
21
17 possible points. Got it? If so, pick a company to analyze and let's get started!
22
23
*Note* Rule Maker analysis is primarily for companies with at least $1 Billion in annual sales.
24
25
26
<Fill in Company Name>
27
28
Part 1: Evaluating the Biz -- Answer honestly! It's either 100% yes, or else no.
AnswerPoints
29
30
1) Dominant Brand -- Is the company the standout category king within its industry?
31
32
2) Repeat Purchases -- Do customers return for purchase at least once a month?
33
34
3) Convenience -- Within its industry, is the company's product/service accessibility
35
and convenience the best?
36
37
4) Expanding Possibilities -- Can you answer "yes" to the following two questions?
38
a) Do your friends know about and use the product/service?
39
b) Is worldwide expansion believable for their stuff?
40
41
5) Your Familiarity & Interest -- Are you a user of the company's products or at least
42
very familiar with them?
43
44
45
Part 2: Company Financials -- Fill in the cells outlined in blue. The spreadsheet will crunch the numbers.
46
47
*Important Note* -- When evaluating quarterly (10-Q) results, use the year-to-date income statement data.
48
For example, if a company is 3/4 of the way through its fiscal year, use the full 9 months of info.
49
50
Hey Fool! Put your cursor right HERE
51
52
Finding Financial Data
53
54
Income Statement:
Balance Sheet:
55
 Sales
Cash & Equivalents
56
Prior-year Sales
Current Assets
57
Cost of Goods Sold
Current Liabilities
58
Net Income
Short-term Debt
59
Long-term Debt
60
61
Cash Flow Statement:
62
Operating Cash Flow
63
Capital Expenditures
64
65
Our StandardActual Result
Calculation
Points
66
67
6) Sales Growth
> 10%Sales
68
Pr. Yr. Sales
69
70
7) Gross Margins
> 50%
(Revenue - COGS)
71
Revenue
72
73
8) Net Margins
> 7%
Net Income
74
Revenue
75
76
9) Cash-to-Debt Ratio
> 1.5
Cash & Equivalents
77
or No Debt
(ST Debt + LT Debt)
78
79
10) Foolish Flow Ratio
< 1.25
(Current Assets - Cash & Equiv.)
80
(Current Liab. - ST Debt)
81
82
11) Cash King Margin
> 10%
(Operating Cash Flow - Cap. Ex.)
83
Revenue
84
85
Total Score =
86
87
88
Rule Maker Beginners board
89
90
Finished? Don't forget to save!
91
92
Want to Modify this Sheet?
93
94
Last Updated on April 3, 2000
95
96
97
98
99
100