The Motley Fool's Rule Maker Essentials

There seems to be some perverse human characteristic

that likes to make easy things difficult. - Warren Buffett

We Fools love Mr. Buffett's pithy quotes. Is it a coincidence that Buffett -- one of the most
successful investors of all time -- hails not from Wall Street, but from America's heartland --
Omaha, Nebraska? We think not. Buffett shuns Wall Street's bewildering ways. And, so
should you, Fool. Buffett's success is the result of his rational assessment of businesses.
Believe it or not, finding great companies is not complicated! Easy -- no; but, simple -- yes.

If you're new to Rule Maker investing, this spreadsheet is for you. By inputing some
basic financial data and answering a few questions, you'll quickly be able to tell whether a
company is a cash-generating, industry-dominating, wealth-creating powerhouse -- what
we call a Rule Maker.

Directions: We've identified 11 general attributes of Rule-Making companies. Part 1

covers five qualitative aspects of a business. For each of these, the scoring is simple --
1 point if the attribute is met, 0 points if it's not. Part 2 covers six financial criteria. Since
these are more objective, each is worth 2 points if met, 0 points if not. Altogether, that's
17 possible points. Got it? If so, pick a company to analyze and let's get started!

*Note* Rule Maker analysis is primarily for companies with at least $1 Billion in annual sales.

<Fill in Company Name>

Part 1: Evaluating the Biz -- Answer honestly! It's either 100% yes, or else no. Answer Points

1) Dominant Brand -- Is the company the standout category king within its industry? Choose

2) Repeat Purchases -- Do customers return for purchase at least once a month? Choose

3) Convenience -- Within its industry, is the company's product/service accessibility Choose

and convenience the best?

4) Expanding Possibilities -- Can you answer "yes" to the following two questions? Choose
a) Do your friends know about and use the product/service?
b) Is worldwide expansion believable for their stuff?

5) Your Familiarity & Interest -- Are you a user of the company's products or at least Choose
very familiar with them?

Part 2: Company Financials -- Fill in the cells outlined in blue. The spreadsheet will crunch the numbers.

*Important Note* -- When evaluating quarterly (10-Q) results, use the year-to-date income statement data.
For example, if a company is 3/4 of the way through its fiscal year, use the full 9 months of info.

Hey Fool! Put your cursor right HERE

Finding Financial Data

Income Statement: Balance Sheet:

Sales Cash & Equivalents
Prior-year Sales Current Assets
 Cost of Goods Sold Current Liabilities
Net Income Short-term Debt
Long-term Debt

Cash Flow Statement:

Operating Cash Flow
Capital Expenditures

Our Actual
Standard Result Calculation Points

6) Sales Growth > 10% Sales

Pr. Yr. Sales

7) Gross Margins > 50% (Revenue - COGS)

Revenue

8) Net Margins > 7% Net Income

Revenue

9) Cash-to-Debt Ratio > 1.5 Cash & Equivalents

or No Debt (ST Debt + LT Debt)

10) Foolish Flow Ratio < 1.25 (Current Assets - Cash & Equiv.)
(Current Liab. - ST Debt)

11) Cash King Margin > 10% (Operating Cash Flow - Cap. Ex.)
Revenue

Total Score =

Rule Maker Beginners board

Finished? Don't forget to save!

Want to Modify this Sheet?

Last Updated on April 3, 2000

Results as of Most Recent SEC Filings on 4/3/00

KO MSFT GPS INTC CSCO SGP PFE

Business Basics
1) Dominant Brand 1 1 1 1 1 0 1
2) Repeat Purchases 1 1 1 1 1 1 1
3) Convenience 1 1 1 1 1 0 0
4) Expanding Possibilities 1 1 1 1 1 1 1
5) Your Familiarity & Interest 1 1 1 1 1 1 1
Company Financials
6) Sales Growth 0 2 2 2 2 2 2
7) Gross Margins 2 2 0 2 2 2 2
8) Net Margins 2 2 2 2 2 2 2
9) Cash-to-Debt 0 2 0 2 2 0 0
10) Flow Ratio 2 2 2 2 2 2 0
11) Cash King Margin 2 2 0 0 2 2 0

Total Score 13 17 11 15 17 13 10
YHOO TROW JDSU NOK

1 1 1 1
1 1 1 1
1 1 1 1
1 1 1 1
1 1 1 1

2 2 2 2
2 2 0 0
2 2 0 2
2 2 2 2
2 2 0 2
2 2 0 0

17 17 9 13