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JOB INTERVIEWING & SALARY NEGOTIATION

Contents:
I. II. III. IV. V. VI. VII. VIII. IX. Interview Preparation.. ....Page 2 Interview Formats.. .....Page 4 Sample Interview Questions.....Page 5 Job Interview Questions You Need Not Answer......Page 7 The Second Interview.. ......Page 8 Evaluating Job Opportunities............Page 10 Negotiating Salary and Benefits..... Page 11 How to Read an Annual Report......Page 13 For Further Reference .........Page 14

I.

INTERVIEW PREPARATION

The best way to prepare for an interview is to practice interviewing with friends, relatives or a Career Counselor. If you practice with friends, be sure to record the session on video or audiotape and listen to yourself afterward. CSC offers videotaped mock interviews with a career counselor which allow you to review the tape and discuss your interviewing strengths and weaknesses. Using this checklist to prepare yourself prior to any interviewing situation will help you stay calm and focused during the session.

Know Yourself
1. What 2 or 3 functional skills do you have to offer? (e.g., organization, leadership, communication, analysis) !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ 2. What specific content skills do you have to offer? (e.g., bookkeeping, financial planning, computer hardware and software) !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ 3. What 2 or 3 adaptive skills do you have which will increase your value as an employee? (e.g., dependability, flexibility, creativity, sense of humor). !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ 4. What are 1 or 2 of your weaknesses and what have you done to successfully overcome these weaknesses and improve yourself? !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ 5. What aspects of your relevant work experience contribute to your qualifications for this particular position? (Include any volunteer work, special training or community experience.) !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________

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6.

What special interests or activities do you participate in which indicate your further capability to perform the job. (Overall career goals, clubs, organizations, outside interests) !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________

Know the Employer & the Position

7. List 2 or 3 points about the employer that you want to mention in the interview. (e.g. product, organizational structure, training program) !" ________________________________________________________________________________ !" _______________________________________________________________________________ !" ________________________________________________________________________________ 8. List 2 or 3 points about the position that you may want to mention in the interview.

!" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ 9. List 2 or 3 reasons why you want to work for this employer. Project your enthusiasm and your real desire to be hired by this employer. !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________

Prepare Questions
10. An interview is a two way process; you are interviewing the employer while you are being interviewed. Spend some time thinking about what further information you need about the employer and the position. Good questions are ones that have been formulated through your own insight. Be sure, however, that your questions are not answered somewhere in the company literature or the job description. !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ !" ________________________________________________________________________________ You can interject your questions at any appropriate times during the interview. The interviewer may signal that the interview is ending by asking whether you have any additional questions. If you do not have any concluding questions you may take this opportunity to summarize your value to the employer and repeat your sincere interest in the position based on the additional information you gained during the interview. Before you leave the interview be sure to find out the next step in the interview process. If the interviewer does not tell you, it is appropriate to ask, When may I expect to hear from you?
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Present Yourself Professionally

1. 2. 3. 4. 5. 6. 7. Dress appropriately for the organization you are interviewing with (call employer or other employees to find out if youre not sure). Arrive early (5 to 10 minutes). Offer a firm handshake at the beginning and the end of the interview. Maintain eye contact throughout the interview (it is natural to look away briefly while you are speaking). Do remember to smile and be friendly. Employers appreciate enthusiasm. Sit comfortably (back straight, leaning slightly forward) dont fidget, squirm or wring your hands. Allow yourself time to think before you answer questions. It is appropriate to rephrase a question, or ask the interviewer to repeat a question that is unclear. Follow up the interview with a thank you letter to the interviewer (see the CSC handout: Guide to Job Search Cover Letters).

II. Interview Formats

The best form of preparation for an employment interview is practice. The more you practice answering questions such as the ones listed below, the more comfortable you will be in an actual interview situation. However, being well prepared does not mean memorizing responses to these questions. Its not too difficult to see why. You could easily become confused if a question were phrased slightly differently than you had expected. Also, interviewers are cautious of applicants who have answers that sound too rehearsed. Careful preparation will give you confidence and not canned answers. Each interviewer you meet with may have a different interviewing style. However, you are likely to encounter three basic types of interviewsstructured, unstructured, and behavioral. Structured interview - The recruiter asks each applicant a specific set of questions. In some cases he or she may write down your responses. A very structured interview may feel rather rigid and formal. A typical question in a structured interview might be What are your career goals and objectives? Unstructured interview This style is more conversational. The recruiter has some general questions in mind, but there is more give and take of information. In an extremely unstructured interview the recruiter may ask very few questions and leave it up to you to initiate a discussion of your qualifications. An unstructured interview might open with the statement, Tell me something about yourself. Behavioral interview - The recruiter asks very pointed questions regarding how you have handled specific kinds of situations, or how you would anticipate dealing with the kinds of challenges presented on the job. A typical question in a behavioral interview might be, Tell me how you handled a recent conflict situation. No matter what the interviewing style, it is important to be prepared, self-confident, and flexible. On rare occasions, an interviewer may ask improper questions. These include references to your race, ethnicity, age, marital status, religion, family background or disability. Questions about these areas are considered unacceptable, and some are illegal. (see Section IV, Job Interview Questions You Need Not Answer.)

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III. SAMPLE INTERVIEW QUESTIONS

The list below includes examples of the kinds of questions interviewers are most likely to ask you. While interviewers have varying opinions about which questions are the most important, they offer the following advice about how to best handle an interview: Be prepareddo your homework on the company. Communicate excitement about your career field. Have a well-defined career objective. Be confident selling yourself, but not overconfident or pushy. Be prepared to speak knowledgeably about your academic discipline, your chosen profession and the company with which you are interviewing. Prepare appropriate questions in advance (not about benefits or training!). Take time to think before you answer questions. Relax and be yourself. We have organized the following questions into subject categories to help you prepare you answers. We suggest that you take time to write down brief answers to familiarize yourself with the questions and your responses. Personal and Motivational Factors Please tell me about yourself. How would you describe yourself? Who or what had the greatest influence on your life? What are some of the greatest personal challenges you have faced during your lifetime? How do you handle rejection? What motivates you to put forward your greatest effort? How do you define success and failure? Skills and Abilities What skills and abilities do you possess that will help make you successful in todays job market? Why should our organization hire you? For you, what are some of the pros and cons of working on a team project? What kind of relationship should exist between a supervisor and those reporting to him or her? Who was the most difficult person you have ever dealt with, and how did you respond? How did you organize your time in school/work/play? What are your major strengths and weaknesses? Do you prefer to work on a team or on your own? Please tell me about your communication skills (or, problem solving skills, leadership style). What do you see as your greatest challenge when starting a new career? If you could create the perfect job for yourself, what would you be doing? Knowledge of the Organization Why did you select XYZ company? What do you expect of the XYZ company? What attracts you to this industry? What do you know about our company? Why do you want our training programs over others? In what ways do you think you can make a contribution to our company? Career Goals and Objectives What are your goals and aspirations for the next three years? Five years? How are you preparing to achieve them? Why do you think you would be good at this profession?
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Work Experiences What were your accomplishments? What were your most significant achievements? What would your last two employers say about you as an employee, either good or bad? What projects were accomplished during your time on the job, and how? Can you describe a time in which your worked under deadline pressure? What did you enjoy most about your previous job experiences? Least? Can you tell me about your toughest job assignment? What kind of supervisor do you prefer? Please tell me about a conflict situation and how you resolved it. Extracurricular Activities and College Experiences Please tell me about your accomplishments in extracurricular activities. Please describe your most rewarding college experiences. If you could relive your college experiences, what would you do differently? What changes would you make in your overall campus life? What were your major responsibilities in campus organizations or activities? Academic Programs and Achievements Why did you choose this major field of study? Why did you choose to attend USF? What were your favorite college courses? Least favorite? Why? How would you relate your academic accomplishments to future career aspirations? What electives did you take outside of your major? Why? What are your academic strengths? What courses gave you the most difficulty? What is your grade point average? How do you feel about this? Do you think your grades are a good indicator of your future career potential? Hypothetical Questions What could you see as the major objective of this job? If we hired you, how would you identify the major roles and responsibilities of your new position? Accomplishments and Achievements In addition to your educational and professional experiences, what else would you like us to know about you in order to make an appropriate decision? Geographic Preferences What geographical location interests you most when working? Are you willing to relocate? Do you mind traveling? Salary and Benefits What starting salary do you expect as an employee? How do you feel about an income made up totally of commissions? When comparing one company offer to another, what factors will be important to you besides salary?

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IV. JOB INTERVIEW QUESTIONS YOU NEED NOT ANSWER

(adapted from Career Opportunities News) In addition to anticipating questions you may be asked about your qualifications and past experiences, you should also be aware of certain questions which, by law, you are not required to answer. Most deal with personal information that is not related to the job or your ability to perform it. Below are some examples of such illegal questions. Should an employer ask you any of these, rather than create an embarrassing moment in the interview, try to respond by saying something positive about your qualifications. What is your marital status? Whether you are married or single, engaged, or live a gay or lesbian life has no relation to your ability to perform your job. To what kinds of clubs or groups do you belong? Your associations are another area in which your right to privacy is protected. On the other hand, if you belong to a professional association or group closely related to the job, this could prove an asset and worth mentioning. When were you born? This is technically illegal, except to probe that you are not a minor or otherwise dont fit the age restrictions posted for the job. In actuality, however, most candidates assume they will record their date of birth on a formal employment application and make no particular attempt to hide it. Older workers, however, often leave dates off resumes and may not wish to disclose their age until actually hired. How would you get to work? Your ease or problems associated with getting to work should be of no concern to the employer. If you are hired, presumably you can get to work. The employer might, however, ask the question with the positive intention of helping you identify a car pool from near where you live. What are your disabilities? Once again, the only concern the employer can legally express deals with your inability to perform the duties of the job. If you are in a wheelchair, you could be eliminated from some jobs requiring standing and frequent movement, but persons in wheelchairs can perform most of the jobs in many organizations. Please submit a picture. You may voluntarily send a picture along with your resume. Almost no one does it these days, but the employer cant ask for a photograph before hiring. Once hired, for identification purposes, many employers like to have pictures of employees in their files. What is your racial/ethnic group? Thanks to discrimination laws, employers may not ask for your racial/ethnic, religious, or other categorical background. An applicant may choose to provide this information voluntarily, if it proves beneficial in an affirmative action hiring situation. Later, once you are hired, employers may legally ask for your racial/ethnic group to help them respond accurately to federal and other statistical requests.

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V. THE SECOND INTERVIEW

Candidates who are being seriously considered are frequently invited for a second interview in the home office or plant. If a company representative considers you to be a qualified candidate for employment, an invitation to continue with the process will be extended. You should acknowledge this invitation with minimum delay. In many cases, the invitation letter includes a number of alternative dates for your visit, with the selection left up to you. You may also receive a telephone call inviting you to a second interview.

What to Expect
The Opportunity - You should accept an invitation for an office visit only if you are seriously interested in the employer. Some candidates have commented on the difficulty of staying fresh for a series of interviews comprised of the same questions. Keep in mind that the information you provide is new to each person you meet, and be patient with repeat questions. Avoid the inclination to give new and different answers or examples in each interview. When the interviewers compare notes at the end of the day they should share a consistent picture of your strengths and accomplishments. In order to make the interview more dynamic and interesting, we recommend that you ask questions to the department or individual with whom you are speaking. This not only gives you a broader range of topics to discuss, but provides you with valuable information about the organization which you will need in order to make a wise employment decision. Since the call-back interview is used to measure mutual fit, you should prepare yourself to become more integrally involved in the interview process. Expenses - If the invitation does not mention expenses, contact the employer for clarification. Most employers pay all reasonable expenses incurred on visits, yet the company will expect you to use discretion in reporting your expenses. Keep records for transportation, food and lodging. If you are planning to visit more than one employer on the same trip, inform each of them and they will assist you in prorating your expenses. The following items are not considered to be normal expenses: entertainment, tours, cigarettes, alcoholic beverages, magazines, personal calls, valet expenses, flight insurance and excessive tips. The Interview The employer conducts office or plant visits in much the same way as your initial interview. It is appropriate to ask in advance for the names and titles of the all people who will be interviewing you during the office visit, and how you will be interviewed. The visit may include a panel interview in which a group of people asks you questions. You may also be expected to interview with several people individually. Second interviews can vary in length from half an hour to a full day of interviews, tours and meals with a variety of company employees. For most candidates, talking to all of these people can be draining. Therefore, strategies such as taking notes when appropriate and timing your responses delaying your questions and reaction may help you to remember names as well as intelligent questions to ask later. During the interview, candidates may expect to discuss job responsibilities, personal qualifications, observe company operations, visit facilities where they might work, meet other personnel, and perhaps tour the community. Business Etiquette - It is not unusual to be taken out to lunch or dinner as part of your second interview. At such events it is essential to remember and practice everything you ever learned about table manners. Here are some basic guidelines: 1. Dont smoke or drink alcoholic beverages (even if invited). 2. Order something that is easy to eat (avoid spaghetti, juicy hamburgers, etc.) and that is moderately priced.
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3. If wine is ordered by your host, have only one glass (if you drink). 4. Remember, even though your luncheon host may not be your potential supervisor, you are still being scrutinized and sized up for a correct fit with the organization. Dont behave any differently than you have during the rest of the interview. 5. Dont jump into talking about business. Allow the conversation to move in general areas, and if necessary, bring up business-related topics later during the meal. Testing - Some employers may ask you to take a series of tests. At this stage employers are interested in how well you fit in with the organization. These tests will generally be objective in nature, and often provide information about your aptitudes, general intelligence, interests or personality. Ask - Fear of the unknown is often what gets in the way of having a successful interview for many applicants. In discussing your visit to any job site remember: If they dont tell you ASK! Knowing what to expect often alleviates worry and anxiety that can prevent you from doing your best.

Follow Up After the Interview

Follow-Up Letter - After the office or plant visit, you should write a follow-up letter to the individual(s) responsible for the interview. A simple thank you letter can often be the deciding factor in whether or not you receive a job offer. The follow-up letter is best sent immediately, but should be no later than a week following the interview. If you are still interested in being considered for a position, it is important to keep in touch with the employer. The Offer - If a job offer is extended at the closing of the second interview, consider the offer thoroughly before giving a hasty response. It is not considered professional to accept a job offer and later renege on that offer. Once you have said, yes, you have made a professional commitment. Failing to honor that commitment could start your career under a cloud that might follow you for a long time.

Interviewing Tips
(Excerpted from Marilyn Moats Kennedys Career Strategist) Offer new information. If you talked about your experiences and accomplishments the first time, now talk briefly about your ideas. You want the interviewer to know more about you, just as you want to learn more about the organization. Give new examples of what you have accomplished. This can be especially effective if youve done additional research. For example, in the initial interview you talked about your results as a manager in your present job; now talk about your results in previous jobs. Ask specific questions. You should also try to verify what you were told as well as what you learned from a competent literature search. What questions must you have answered before you can make an informed choice? (If you cant think of any, youre not thinking deeply enough.) Let your research show. Quote some of the people youve talked to, not naming them if its inappropriate. What issues did they raise? This lets the interviewer see that you are serious about the job without gushing about how much you think you would like it.

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VI. EVALUATING JOB OPPORTUNITIES

In order to evaluate a job opportunity, you must first determine your needs, wants and desires. Do not feel pressured to make a quick decision. Instead, imagine yourself going to work each day for that employer and consider the following: How would you feel about the position, your work location, your co-workers? Would the work be satisfying, challenging, enjoyable? How would you feel about the lifestyle you would be living? Would the position give you enough time for yourself, your family and friends? Would the compensation provide sufficient income to support your needs and wants? Below is a checklist of items you might want to consider in evaluating potential jobs and job offers. Use the scale on the left to prioritize the values on the list, and then use the scale on the right to compare your priorities with the realities of each position. Circle those which most closely match your priorities. For additional assistance with your decision-making, we suggest you see a career counselor. Your Priorities 3=Must have (most important) 2=Really want (important) 1=Nice to have (least important) 0=Not Important Degree to which job meet priorities 3=Better than expected 2=Meets my needs 1=Less than expected 0=Does not meet my needs /NA

Work Values Fulfilling Work Variety of Work Responsibility Recognition Autonomy Challenge Advancement Opportunity Flexible Schedule Working Conditions Salary Fringe benefits Training Program Location of Job Commuting distance Size of Company Reputation of Company Friendly Co-workers Stability of industry Type of Business

Your Priority

Job #1

Job #2

Job #3

Job #4

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VII. NEGOTIATING SALARY & BENEFITS

Most job seekers feel anxious, embarrassed and uncomfortable when the time comes to discuss salaries. Advice such as Never bring up the issue of salary; let the interviewer say it first, rarely helps if you dont have any idea of how to respond when the topic does come up. This handout gives you some basic information about negotiating salaries and benefits as part of your job search. For additional information, please refer to the list of books on the back of this page, or talk to a career counselor. The Fundamentals of Salary Negotiation 1. 2. 3. Determine the market rate salary range for this type of position in this particular Industry. Prepare a budget to determine your financial needs. Decide, before you go into an interview, what salary you want to earn, what you need to live on, and what you will be willing to settle for. 4. Be realistic: entry-level salaries are less negotiable than salaries for mid-level or executive positions. 5. Practice your salary negotiation skills with a friend, or during a CSC videotaped mock interview session. 6. Document your skills and accomplishments, and be prepared to talk about them. Know why youre worth whatever you expect to be paid ! 7. Dont be the first to mention salary during the interview, and use the negotiating tips listed below when the topic does come up. 8. Never say, I need at least ___ dollars. 9. Dont worry about what your friends are making, the employer certainly isn't. 10. Never lie about your salary history. 11. Relax, its natural to feel embarrassed or uncomfortable discussing salary. 12. Once you have accepted a job offer and salary level, be sure to get it in writing. How can I find out the market rate salary range? Uncovering salary information is not as difficult as it may seem. Try the following resources: 1. visit the Career Services Center website (http://www.usfca.edu/career/), click on Students, then Career Exploration / Research and scroll down to view a variety of salary links, including: !" www.jobsmart.org !" www.salaryexpert.com !" www.wageweb.com !" www.college.wsj.com !" www.salary.com use job listings which indicate salaries for related positions ask your friends, networking contacts, and other job seekers contact professional associations in your field of interest explore salary resources of the chamber of commerce in your region call employment agencies or executive search firms review business and trade publications (i.e., U.S. News and Working Woman publish annual salary surveys)

2. 3. 4. 5. 6. 7.

Are salaries really negotiable? Yes, and no. The degree to which a salary is negotiable depends on the position, the manager, the organization, your perceived value, and the state of the job market. Most entry-level positions have set salaries that are subject to very little if any negotiation, perhaps a few hundred dollars of negotiating room. Mid-level positions typically have salary ranges of between 10 and 20 percent (i.e., a job paying $35,000 a year may have a salary range between $31,500 and $38,500). Employers will negotiate within the range, but will rarely exceed it unless you are an exceptional candidate. Most state and federal government jobs have rigid, non-negotiable salary scales based on education and experience. In general, higher-level management and executive positions offer the greatest opportunities for
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negotiation. In any case, never accept an offer in the interview. Express your strong interest, but state that you always think over decisions of this magnitude. Tell your interviewer when youll contact him or her with your decision. How can I handle questions about salary during an interview? 1. If asked, What are your salary requirements? summarize the requirements of the position as you understand them, and then ask the interviewer for the normal salary range in his/her company for that type of position. On the job application, respond to this question with negotiable. 2. If asked, How much did you earn on your last job? tell the interviewer that you would prefer learning more about the current position before you discuss compensation, and that you are confident you will be able to reach a mutual agreement about salary at that time. Then use examples of your accomplishments that prove your value, dont just refer to your experience in a general way. Comparisons to your current or past salary are irrelevant and should be avoided. Your focus should be on the benefits youll bring in the future, rather than on your past salary, which may not have reflected your true market value. Also remember that cost of living differentials affect what you can expect to earn in a new location. If told, The salary range for this position is $30,000 to $34,000, is that what you were expecting? Tell the interviewer that it does come near what you were expecting, and then offer a range which places the top of the employers range into the bottom of your range (i.e., I was thinking in terms of $34,000 to $38,000). Remember: be sure that the range you were thinking about is consistent with what you learned about market rate for that position. If told, The salary is $2500 per month, try not to look excited or disappointed. Simply repeat the salary, look up as though you were thinking about it, and pause. Dont worry about the silence; give the employer an opportunity to increase the offer. If the interviewer does not change the offer, try the response suggested in #3 above.

3.

4.

Introduction to Benefits In addition to salary, take into consideration the employee benefit plan when evaluating an offer made by a company. In todays job market many employee benefits are considered standard they come with the job and are not subject to negotiation. However, an increasing number of employers are offering flexible benefit packages, which allow employees a variety of choices regarding their benefits. Most entry-level employees can expect a basic benefit package consisting of: Health insurance Life insurance Paid holidays Dental insurance Paid vacation time Disability insurance Paid sick leave

A more comprehensive benefit package might include some or all of the following: Bonuses Company car Desirable office Expense accounts Parental leave Professional membership dues Relocation payments Savings plans Stock Options Termination agreement (severance pay) Child and day-care services Cost-of-living adjustments Education and training programs Flexible work schedule Parking Profit sharing plans Retirement plans Special equipment (i.e. laptop computer) Supplementary pay plans Unpaid leave time

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VIII. HOW TO READ AN ANNUAL REPORT

(Adapted from an interview by International Paper Co. with Jane Bryant Quinn, business commentator and author)
To some business people I know, curling up with a good annual report is almost more exciting than getting lost in John le Carrs latest spy thriller. But to you it might be another story. Who needs that? I can hear you ask. You doif youre going to gamble any of your future working for a company, investing in it, or selling to it. Why should you bother? Say youve got a job interview at Galactic Industries. Well, what does the company do? Does its future look good? Or will the next recession leave your part of the business on the beach? Or say youre thinking of investing your own hard-earned money in its stock. Sales are up. But are its profits getting better or worse? Or say youre going to supply it with a lot of parts. Should you extend Galactic plenty of credit or keep it on a short leash? How to get one Youll find answers it its annual report. Where do you find that? Your library should have the annual reports of nearby companies plus leading national ones. It also has listings of companies financial officers and their addresses so you can write for annual reports. So now Galactic Industries latest annual report is sitting in front of you ready to be cracked. How do you crack it? Start at the back First, turn back to the report of the certified public accountant. This third-party auditor will tell you right off the bat if Galactics report conforms with generally accepted accounting principles. Watch out for the words subject to. They mean the financial report is clean only if you take the companys word about a particular piece of business, and the accountant isnt sure you should. Doubts like this are usually settled behind closed doors. When a subject to makes it into the annual report, it could mean trouble. What else should you know before you check the numbers? Stay in the back of the book and go the footnotes. Yep! The whole profits story is sometimes in the footnotes. Are earnings down? If its only because of a change in accounting, maybe thats good! The company owes less tax and has more money in its pockets. Are earnings up? Maybe thats bad. They may be up because of a special windfall that wont happen again next year. The footnotes know. For what happened and why? Now turn to the letter from the chairman. Usually addressed to our stockholders, its up front, and should be in more ways than one. The chairmans tone reflects the personality, the wellbeing of his company. In his letter he should tell you how his company fared this year. But more important, he should tell you why. Keep an eye out for sentences that start with Except for and Despite the Theyre clues to problems. Insights into the future On the positive side, a chairmans letter should give you insights into the companys future and its stance on the economic or political trends that may affect it. While youre up front, look for whats new in each lines of business. Is management getting the company in good shape to weather the tough and competitive 1980s? Nowand no soonershould you dig into the numbers! On source is the balance sheet. It is a snapshot of how the company stands at a single point in time. On the left are assets everything the company owns. Things that can quickly be turned into cash are current assents. On the right are liabilitieseverything the company owes. Current liabilities are the debts due in one year, which are paid out of current assets. The difference between current assets and current liabilities is net working capital, a key figure to watch from one annual (and quarterly) report to another. If working capital shrinks, it could mean trouble. One possibility: the company may not be able to keep dividends growing rapidly. Look for growth here Stockholders equity is the difference between total assets and liabilities. It is the presumed dollar value of what stockholders own. You want it to grow.

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Another important number to watch is long-term debt. High and rising debt, relative to equity may not be the problem for a growing business. But it shows weakness in a company thats leveling out. (More on that later.) The second basic source of numbers is the income statement. It shows how much money Galactic made or lost over the year. Most people look at one figure fist. Its in the income statement at the bottom: net earnings per share. Watch out. It can fool you. Galactics management could boost earnings by selling of a plant. Or by cutting the budget for research and advertising. (See the foot-notes!) So dont be smug about net earnings until youve found out how they happenedand how they might happen next year. Check net sales first The number should look at first in the income statement is net sales. Ask yourself: Are sales going up at a faster rate than the last time around? When sales increases start to slow, the company may be in trouble. Also ask: Have sales gone up faster than inflation? If not, the companys real sales may be behind. And ask yourself once more: Have sales gone down because the company is selling

off a losing business? If so, profits may be soaring. (I never promised you that figuring out an annual report was going to be easy!) Get out your calculator Another important thing to study today is the companys debt. Get out your pocket calculator, and turn to the balance sheet. Divide long-term liabilities by stockholders equity. Thats the debt-to-equity ratio. A high ratio means that the company borrows a lot of money to spark its growth. Thats okayif sales grow, too, and if theres enough cash on hand to meet the payments. A company doing well on borrowed money can earn big profits for its stockholders. But if sales fall, watch out. The whole enterprise may slowly sink. Some companies can handle high ratios, others cant. You have to compare That brings up the most important thing of all: One annual report, one chairmans letter, one ratio wont tell you much. You have to compare. Is the companys debt-to-equity ratio better or worse than it used to be? Better or worse, after this recession? In companywatching, comparisons are all. They tell you if management is staying on top of things.

Financial analysts work out many other ratios to tell them how the company is doing. You can learn more about them from books on the subject. Ask your librarian. But one thing you will never learn from an annual report is how much to pay for a companys stock. Galactic may be running well. But if investors expected it to run better, the stock still might fall. Or, Galactic could be slumping badly. But if investors see a better day tomorrow, the stock could rise. Two important suggestions Those are some basic weighing a companys health from its annual report. But if you want to know all you can about a company, you need to do a little more homework. First, see what the business press has been saying about it over recent years. Again, ask your librarian. Finally, you should keep up with whats going on in business, economics and politics here and around the world. All canand will-affect you and the companies youre interested in. Each year, companies give you more and more information in their annual reports. Profiting from that information is up to you. I hope you profit from mine.

IX. For Further Reference

Bolles, R., (2002) What Color is Your Parachute?* Haldane, B., (2000) Answers to Tough Interview Questions* Haldane, B., (2001) Haldanes Best Salary Tips for Professionals Kennedy, J., (1996) Job Interviews for Dummies* Messmer, M., (1999) Job Hunting for Dummies* Pinkley, R. & Northcraft, G., (2000) Get Paid What Youre Worth: the Expert Negotiators Guide to Salary and Compensation Porot, D., (2001) 101 Salary Secrets: How to Negotiate Like a Pro *Available in CSC Resource Library
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