• What business is the company in? Understand the products the company sells and the growth prospects of that industry. Is it in a high growth business or a business that is likely to have slow growth in the years ahead? For some companies, this may be basic information that can be understood without much research. For other companies, you may have to read quite a bit before you understand exactly what they do.

• How much product is the company selling? Most publicly traded companies have sales figures in the hundreds of millions of dollars. If you're interested in a company with sales significantly below that, realize that it is probably a growth company with more risk than a mature, established company. Also review the trend in sales to make sure the company has steadily increasing sales.

• Is the company profitable? You're not just looking to make sure the company has positive net income for the year. You want to determine whether the amount of profit is reasonable for that industry. To get a feel for that, take a look at return on equity, which equals the company's net income divided by shareholder's equity, and return on assets, which equals net income divided by total assets.

• Does the company have positive cash flow? The company's cash flow statement will indicate whether cash increased or decreased during the period. A company can adjust its accounting policies to affect net earnings, but cash is more difficult to manipulate. Thus, it's a good second check on a company's profitability.

• How much debt does the company have? While most companies need some debt, too much debt can be burdensome. With interest rates currently at such low levels, increasing interest rates in the future could cause problems for companies carrying too much debt.

• Has there been any negative news about the company? News like lower than expected earnings, management shakeups, problems with a new product, and accounting restatements can have a detrimental effect on the stock's price. If the event is just a temporary problem, it could be a good time to purchase the stock. However, often one negative news item leads to another. Make sure there is no more bad news before you purchase the stock.