Now lets check the consistency The year 2001 was a bad year and 2003 and 2004

Now lets check the consistency the year 2001 was a

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Now let’s check the consistency. The year 2001 was a bad year and 2003 and 2004 were flat. What was going on then? The year 2001 was a recession year. It might be that RL doesn’t do so well when we’re in a recession, and that would make sense, of course. People cut back on luxury goodies and stick to necessities when money is tight. Something to keep in mind for now.
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Do Sales the same way. Sales grew from $1,713 million to $4,880 million in nine years. Again, I’m not going to worry about getting the latest sales. 1. First, let’s chop $1,713, the sales from 1999, to $17 for ease of calculation. 2. Now double $17 as many times as you can and still not go over the 2008 sales of $50 (rounded and chopped). From $17 to $34 is one double, and $34 to $50 is a half double. So it takes 1.5 doubles to get to $50 in nine years. 3. So how many years does it take to double one time if we have 1.5 doubles in nine years? Divide 90 by 15. That’s a double every six years. 4. Now again we use the Rule of 72, which says if you know the number of years it takes to double once , divide the years into 72 and you get the growth rate. So now divide 6 into 72 and you get 12 percent for the Sales growth rate. Then do Cash Flow, too. MSN doesn’t do long-term cash-flow summaries, unfortunately. We have to dig it out. Click on the Cash Flow tab. Look at the line Cash from Operating Activities (sometimes called OPS if you have the Operating Cash Flow on a per share basis). Read
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from right to left. Cash grew from 213 to 695 in five years. Don’t bother looking at Cash from Investing Activities, Cash from Financing Activities, or Net Changes in Cash. Focus just on Cash from Operating Activities. The reason I prefer to use Cash from Operating Activities is that it comes from the business itself. Companies burn up Investing cash by buying companies or capital items or even just T-bills. When that happens, you get a drop in that form of cash. That can mess up your view of the business if you count it as a drop in Cash Flow when all that happened is they put the cash into a safe investment. Same thing with Financing cash. That section is about money going out the door to retire debt, buy back stock, or pay dividends. You’d hardly count that as a negative on Cash Flow, but Cash gets deducted for each of these. So for our purposes we’re going to just keep it simple and look at how much cash the operations of the business are producing. Then we have something stable from year to year to compare with previous years and we’ll get a better Cash Flow growth number because of that. You can do this in your sleep it’s so easy. 1. First, chop $213, the cash flow from 2003, to $200 for ease of calculation. 2. Now double $200 as many times as you can and still not go over the 2007 sales of $800 (rounded and chopped). From $200 to $400 is one double, and $400 to $800 is two doubles. So it’s a tad less than two
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doubles to get from $213 to $795 in five years.
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