FREE RESEARCH CHECKLIST
Before You Buy
Understand the business before you buy the stock.
Eight practical questions to organize your first look at a company, followed by a fictional example you can challenge.
Start with one company
Record the company, ticker, and as-of date in your notes. For each question below, write an answer and the source behind it. Mark it complete only when you have evidence. Leave unknowns visible.
Three pages with fillable answer fields and a fictional worked example. Save a copy to keep your notes; its fields do not send answers to us.
Where to look: a U.S. company’s 10-K typically puts its business in Item 1, risks in Item 1A, management’s discussion in Item 7, and financial statements in Item 8. Check newer filings for changes.
Use the checklist here immediately. Joining the newsletter is optional; a feedback email does not sign you up for it.
1. Understand the business
Name the paying customer, what they buy, and why they might choose this business. Identify a specific revenue source, not just a familiar brand.
Record: your answer, source, and anything still unknown.
2. Follow the cash
Compare operating cash flow with net income across at least two years. Note major capital spending and unusual items. A reported profit is not the same as cash.
Record: your answer, source, and anything still unknown.
3. Check debt and commitments
Record cash, debt, upcoming debt maturities, and material cash commitments. Ask how the business funds itself if operations weaken.
Record: your answer, source, and anything still unknown.
4. Examine the dividend
If it pays one, compare cash dividends with an appropriate cash measure. Check the definition and other cash demands. Dividend yield is not a safety rating.
Record: your answer, source, and anything still unknown.
5. Question the price
Record the share price and date. State what growth or profit improvement the price seems to require. Compare a less favorable scenario; one ratio cannot settle value.
Record: your answer, source, and anything still unknown.
6. Write the counterargument
Write the strongest reason your idea could be wrong and one fact that would change your view. Separate a business problem from ordinary share-price movement.
Record: your answer, source, and anything still unknown.
7. Check sources and dates
Read the latest 10-K and newer 10-Q/8-K filings, when applicable. Record the source, date, units, and period behind key numbers. Label estimates as estimates.
Record: your answer, source, and anything still unknown.
8. Choose the next research step
List what remains unanswered. Choose more research, set aside, or ready for fuller evaluation. Checkmarks record evidence; they do not add up to a buy signal.
Record: your answer, source, and anything still unknown.
Use suitable measures for the business. Banks, insurers, REITs, and funds need additional, different analysis. This is a first pass, not a complete investment process.
Try a fictional cash-flow example
Not McDonald’s or another real company. Assume an ordinary operating business and one annual period. All amounts below are in $ millions; the stress case is illustrative.
| Annual cash measure | Base | Stress |
|---|---|---|
| Operating cash flow | 100 | 85 |
| Capital spending | 40 | 40 |
| Defined FCF: cash flow less capital spending | 60 | 45 |
| Common cash dividends | 50 | 50 |
| FCF / cash dividends | 1.20x | 0.90x |
| FCF less dividends* | 10 | -5 |
Definition: FCF here means operating cash flow less capital spending. It is not a standardized measure. The $10m difference after dividends is not freely spendable cash: debt principal and other required cash uses are not deducted in this example.
A 15% drop in operating cash flow leaves this defined cash measure $5m short of unchanged dividends. Investigate the balance sheet and other cash demands; the ratio alone cannot establish safety or value.
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Help shape the next tool
After trying this on a company or the fictional example, tell us which question helped most or stopped you, and what you tried next. Specific experiences help us improve the checklist and decide what a future tool should do.
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Primary learning sources
Investor.gov: Reading company filings
SEC: Free cash flow, question 102.07
Version 1.0 | October 9, 2026. Original educational resource by Dividend Theory LLC.
General financial education, not personalized investment advice. Investing involves risk, including loss of principal. Dividends and returns are not guaranteed. Read our Terms and Disclosures.
