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The Financial Times Guide to Investing, 3rd Edition by Glen Arnold

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14

Analysing industries

The examination and analysis of the report and accounts tells us a lot about the company’s past performance. The questions we must now ask are: How sustainable is that past performance? What potential is there for improvement in the future? The answers to these questions depend not only on the financial strength of the company, but also on the type of industry or industries in which the company operates, its possession or otherwise of extraordinary resources allowing it to perform well in the industry (i.e. to achieve returns on capital invested in real assets significantly above the industry average) and the honesty and competence of the managerial team. This chapter focuses on the first of these factors: the analysis ...

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