Talking to Management, Part 2: Gleaning Financial Subtleties
A healthy organization tends to have at least 5% turnover. Depending on the industry, a turnover rate between 5% and 15% strikes a good balance between institutional memory and new ideas.
The same logic can apply to suppliers. Long-term relationships are good, but there is value in testing them every now and then to see whether a better deal can be struck in price, quality or other terms. Repeat customers work the same way. Too low a repeat customer rate means that marketing costs will be relatively high. Too high a repeat customer rate, and the company might be missing out on additional profits from a price increase. Key Points:- Analyzing a company's free cash flow can help you steer clear of blowups.
- Find out how a company plans to reinvest that free cash.
- Turnover rate can reveal internal chaos or missed opportunities.
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