Management Analysis means analyzing the quality of Management running the business. This is something always ignored by people while they go for market investment. Whenever a person is running a business and asks you to invest money in his business, you should always see two things
- His ability and performance to run the business.
- His integrity and honesty.
If any of the above two things is missing, then your investment in that company can be very dangerous. If management is able and aspiring but not honest for his investors, then you should never invest in such companies . The analysis of these two things comes under management analysis.
There may be multiple reasons behind why people ignore analyzing the Management Quality. Some of them are
- There is no formula to calculate good or bad management.
- Management quality can’t be calculated in any figures in the reports like balance sheet, p&l statement or annual reports.
- The information about the management of a company is not easily available on internet.
- It’s not clear how to calculate the management efficiency and integrity
But still if you want to invest successfully in quality stocks, you must do Management analysis.If you want to know more about companies promoters and management, there are lot of sources available from where one can get this information.Some of them are listed below
- Management interviews and videos: It’s very important to watch management interviews with keen interest because here they discuss about the company’s functioning and their performance. Also they share various key information like plans for expansion or their any temporary problems which the company faces.
- Know About CEO’S and key people: It’s very important to know about the key people of management and their work ethics. These are the people whose market reputation gives an edge to the company over their peers. Like Ratan tata who is known for his work ethics, honesty and integrity. So know about the CEO’S of the company through news, articles and magazines.
- Go Through Annual Reports Deeply: Every serious investor should get the habit of reading the annual reports of the company in detail. There is one section called management discussion and analysis in annual report where company shares the past and future performance of the company and the important milestones they have achieved.
- Earnings Conference Call: Do attend the quarterly earning conference call where the management discuss about the quarterly performances and the reason behind the good or bad performance. One can get the detail insight of the temporary problems a company is facing and what management is doing to resolve it. Also Q&A sessions are there where people can ask their questions.
- Know about the past records of frauds and promoters background: You can easily get information from google about the past frauds of the company. Know about the promoters past decisions made and whether those decisions are taken keeping the interest of minority shareholders.
- Promoters Salary And Remuneration: Salary of the key people in management or promoter gives a very good idea about management intention and quality. If a company is going through the bad phase but still the promoters are taking big hefty salary to their home that means they don’t care to take company out from the tough times.
Promoters salary information can be obtained from annual reports. So it is important to go through each and every section of annual report.
A quick check on above points can surely give you good idea about type of management the company has and how likely the company is going to perform in future .