Job Interviewing & Salary Negotiation

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    Educating minds and hearts to change the world. www.usfca.edu/career

    JOB INTERVIEWING &SALARY NEGOTIATION

    Contents:

    I. Interview Preparation.. ....Page 2

    II. Interview Formats.. .....Page 4

    III. Sample Interview Questions.....Page 5

    IV. Job Interview Questions You Need Not Answer......Page 7

    V. The Second Interview.. ......Page 8

    VI. Evaluating Job Opportunities............Page 10

    VII. Negotiating Salary and Benefits..... Page 11

    VIII. How to Read an Annual Report......Page 13

    IX. For Further Reference.........Page 14

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    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 thesession on video or audiotape and listen to yourself afterward. CSC offersvideotaped mock interviews with a career counselor which allow you to review thetape and discuss your interviewing strengths and weaknesses. Using this checklist t

    prepare yourself prior to any interviewing situation will help you stay calm andfocused during the session.

    o

    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, computerhardware 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 theseweaknesses and improve yourself?

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    5. What aspects of your relevant work experience contribute to your qualifications for this particularposition? (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 toperform 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 realdesire to be hired by this employer.

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    Prepare Questions10. 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 employerand the position. Good questions are ones that have been formulated through your own insight. Besure, however, that your questions are not answered somewhere in the company literature or the jobdescription.

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    ! ________________________________________________________________________________

    You can interject your questions at any appropriate times during the interview. Theinterviewer may signal that the interview is ending by asking whether you have anyadditional questions. If you do not have any concluding questions you may takethis opportunity to summarize your value to the employer and repeat your sincereinterest in the position based on the additional information you gained during theinterview. Before you leave the interview be sure to find out the next step in theinterview process. If the interviewer does not tell you, it is appropriate to ask, When may I expect tohear from you?

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    Present Yourself Professionally

    1. Dress appropriately for the organization you are interviewing with (call employer or other employeesto find out if youre not sure).

    2. Arrive early (5 to 10 minutes).3. Offer a firm handshake at the beginning and the end of the interview.4. 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.5. Sit comfortably (back straight, leaning slightly forward) dont fidget, squirm or wring your hands.6. 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.7. 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. Themore you practice answering questions such as the ones listed below, themore comfortable you will be in an actual interview situation. However, beingwell prepared does not mean memorizing responses to these questions. Itsnot too difficult to see why. You could easily become confused if a questionwere phrased slightly differently than you had expected. Also, interviewersare 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 toencounter three basic types of interviewsstructured, unstructured, and behavioral.

    Structured interview - The recruiter asks each applicant a specific set of questions. In some cases heor she may write down your responses. A very structured interview may feel rather rigid and formal. Atypical 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 inmind, but there is more give and take of information. In an extremely unstructured interview the recruitermay ask very few questions and leave it up to you to initiate a discussion of your qualifications. Anunstructured interview might open with the statement, Tell me something about yourself.

    Behavioral interview - The recruiter asks very pointed questions regarding how you have handledspecific kinds of situations, or how you would anticipate dealing with the kinds of challenges presentedon the job. A typical question in a behavioral interview might be, Tell me how you handled a recentconflict situation.

    No matter what the interviewing style, it is important to be prepared, self-confident, and flexible. On rareoccasions, 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 consideredunacceptable, 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. Whileinterviewers have varying opinions about which questions are the most important, they offer the followingadvice 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 chosenprofession 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. Wesuggest that you take time to write down brief answers to familiarize yourself with the questions and yourresponses.

    Personal and Motivational FactorsPlease 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 AbilitiesWhat skills and abilities do you possess that will help make you successful in todaysjob 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 himor 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 OrganizationWhy 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 ObjectivesWhat are your goals and aspirations for the next three years? Five years? How are you preparing toachieve them?

    Why do you think you would be good at this profession?

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    Work ExperiencesWhat 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 ExperiencesPlease 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 AchievementsWhy 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 QuestionsWhat 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 AchievementsIn 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 PreferencesWhat geographical location interests you most when working?

    Are you willing to relocate? Do you mind traveling?

    Salary and BenefitsWhat 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 fromCareer Opportunities News)

    In addition to anticipating questions you may be asked about your qualificationsand past experiences, you should also be aware of certain questions which, bylaw, 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 ofsuch illegal questions. Should an employer ask you any of these, rather thancreate an embarrassing moment in the interview, try to respond by sayingsomething 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 toperform 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 youbelong 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 agerestrictions posted for the job. In actuality, however, most candidates assume they will record their dateof 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 youare hired, presumably you can get to work. The employer might, however, ask the question with thepositive 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 theduties of the job. If you are in a wheelchair, you could be eliminated from some jobs requiring standingand 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 theemployer cant ask for a photograph before hiring. Once hired, for identification purposes, manyemployers 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 othercategorical background. An applicant may choose to provide this information voluntarily, if it provesbeneficial in an affirmative action hiring situation. Later, once you are hired, employers may legally askfor 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 invitedfor a second interview in the home office or plant. If a companyrepresentative considers you to be a qualified candidate foremployment, an invitation to continue with the process will beextended. You should acknowledge this invitation with minimum

    delay. In many cases, the invitation letter includes a number ofalternative dates for your visit, with the selection left up to you. Youmay 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 inthe employer. Some candidates have commented on the difficulty of staying fresh for a series ofinterviews comprised of the same questions. Keep in mind that the information you provide is new toeach person you meet, and be patient with repeat questions. Avoid the inclination to give new anddifferent 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 tothe department or individual with whom you are speaking. This not only gives you a broader range oftopics to discuss, but provides you with valuable information about the organization which you will needin order to make a wise employment decision. Since the call-back interview is used to measure mutualfit, 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. Mostemployers pay all reasonable expenses incurred on visits, yet the company will expect you to usediscretion in reporting your expenses. Keep records for transportation, food and lodging. If you areplanning 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 andexcessive tips.

    The Interview The employer conducts office or plant visits in much the same way as your initialinterview. It is appropriate to ask in advance for the names and titles of the all people who will beinterviewing you during the office visit, and how you will be interviewed. The visit may include a panelinterview in which a group of people asks you questions. You may also be expected to interview withseveral people individually. Second interviews can vary in length from half an hour to a full day ofinterviews, tours and meals with a variety of company employees. For most candidates, talking to all ofthese people can be draining. Therefore, strategies such as taking notes when appropriate and timingyour responses delaying your questions and reaction may help you to remember names as well asintelligent questions to ask later. During the interview, candidates may expect to discuss jobresponsibilities, personal qualifications, observe company operations, visit facilities where they mightwork, 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 tablemanners. Here are some basic guidelines:

    1. Dont smoke or drink alcoholic beverages (even if invited).

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    2. Order something that is easy to eat (avoid spaghetti, juicy hamburgers, etc.) and that is moderatelypriced.

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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 beingscrutinized and sized up for a correct fit with the organization. Dont behave any differently than youhave during the rest of the interview.

    5. Dont jump into talking about business. Allow the conversation to move in general areas, and ifnecessary, 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 oftenprovide 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 manyapplicants. In discussing your visit to any job site remember: If they dont tell you ASK! Knowing what toexpect 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 weekfollowing the interview. If you are still interested in being considered for a position, it is important to keepin touch with the employer.

    The Offer- If a job offer is extended at the closing of the second interview, consider the offer thoroughlybefore giving a hasty response. It is not considered professional to accept a job offer and later renege onthat offer. Once you have said, yes, you have made a professional commitment. Failing to honor thatcommitment 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 andaccomplishments the first time, now talk briefly about your ideas.You want the interviewer to know more about you, just as you wantto learn more about the organization.

    Give new examples of what you have accomplished.This canbe especially effective if youve done additional research. Forexample, in the initial interview you talked about your results as amanager 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 learnedfrom a competent literature search. What questions must you have answered before you can make aninformed 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 itsinappropriate. 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 feelpressured to make a quick decision. Instead, imagine yourself going to work each day for that employer andconsider the following: How would you feel about the position, your work location, your co-workers? Would twork be satisfying, challenging, enjoyable? How would you feel about the lifestyle you would be living? Wouthe 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 thescale on the left to prioritize the values on the list, and then use the scale on the right to compare your prioritwith the realities of each position. Circle those which most closely match your priorities. For additionalassistance with your decision-making, we suggest you see a career counselor.

    Your Priorities3=Must have (most important)2=Really want (important)1=Nice to have (least important)0=Not Important

    Degree to which job meet priorities3=Better than expected2=Meets my needs1=Less than expected0=Does not meet m needs /NA

    Work Values YourPriority

    Job #1 Job #2 Job #3 Job #4

    Fulfilling Work

    Variety of Work

    Responsibility

    Recognition

    Autonomy

    ChallengeAdvancement 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

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    VII. NEGOTIATING SALARY & BENEFITS

    Most job seekers feel anxious, embarrassed and uncomfortable when the time comes to discusssalaries. Advice such as Never bring up the issue of salary; let the interviewer say it first, rarely helps ifyou dont have any idea of how to respond when the topic does come up. This handout gives you somebasic information about negotiating salaries and benefits as part of your job search. For additionalinformation, 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. Determine the market rate salary range for this type of position in this particular Industry.2. Prepare a budget to determine your financial needs.3. 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 belowwhen 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

    2. use job listings which indicate salaries for related positions3. ask your friends, networking contacts, and other job seekers4. contact professional associations in your field of interest5. explore salary resources of the chamber of commerce in your region6. call employment agencies or executive search firms7. review business and trade publications (i.e., U.S. Newsand Working W

    publish annual salary surveys)oman

    Are salaries really negotiable?Yes, and no. The degree to which a salary is negotiable depends on the position, the manager, theorganization, your perceived value, and the state of the job market. Most entry-level positions have setsalaries that are subject to very little if any negotiation, perhaps a few hundred dollars of negotiatingroom. 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 withinthe range, but will rarely exceed it unless you are an exceptional candidate. Most state and federalgovernment jobs have rigid, non-negotiable salary scales based on education and experience. Ingeneral, higher-level management and executive positions offer the greatest opportunities for

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    http://www.usfca.edu/career/http://www.usfca.edu/career/
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    negotiation. In any case, never accept an offer in the interview. Express your strong interest, but statethat you always think over decisions of this magnitude. Tell your interviewer when youll contact him orher 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 preferlearning more about the current position before you discuss compensation, and that you areconfident you will be able to reach a mutual agreement about salary at that time. Then use examplesof 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 shouldbe on the benefits youll bring in the future, rather than on your past salary, which may not havereflected your true market value. Also remember that cost of living differentials affect what you canexpect to earn in a new location.

    3. 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 whichplaces 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 withwhat you learned about market rate for that position.

    4. If told, The salary is $2500 per month, try not to look excited or disappointed. Simply repeat thesalary, look up as though you were thinking about it, and pause. Dont worry about the silence; givethe employer an opportunity to increase the offer. If the interviewer does not change the offer, try theresponse suggested in #3 above.

    Introduction to Benefits

    In addition to salary, take into consideration the employee benefit plan when evaluating an offer made bya company. In todays job market many employee benefits are considered standard they come with thejob and are not subject to negotiation. However, an increasing number of employers are offering flexiblebenefit packages, which allow employees a variety of choices regarding their benefits. Most entry-levelemployees can expect a basic benefit package consisting of:

    Health insurance Dental insurance Disability insuranceLife insurance Paid vacation time Paid sick leavePaid holidays

    A more comprehensive benefit package might include some or all of the following:

    Bonuses Child and day-care servicesCompany car Cost-of-living adjustmentsDesirable office Education and training programsExpense accounts Flexible work scheduleParental leave ParkingProfessional membership dues Profit sharing plansRelocation payments Retirement plansSavings plans Special equipment (i.e. laptop computer)Stock Options Supplementary pay plansTermination agreement (severance pay) 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 gettinglost in John le Carrs latest spythriller.

    But to you it might be anotherstory. Who needs that? I canhear you ask. You doif youregoing to gamble any of yourfuture 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, whatdoes the company do? Does itsfuture look good? Or will the nextrecession leave your part of thebusiness on the beach?

    Or say youre thinking ofinvesting your own hard-earnedmoney in its stock. Sales are up.But are its profits getting betteror worse?

    Or say youre going to supply itwith a lot of parts. Should you

    extend Galactic plenty of creditor keep it on a short leash?

    How to get oneYoull find answers it its annualreport. Where do you find that?Your library should have theannual reports of nearbycompanies plus leading nationalones. It also has listings ofcompanies financial officers andtheir addresses so you can writefor annual reports.

    So now Galactic Industrieslatest annual report is sitting infront of you ready to be cracked.How do you crack it?

    Start at the backFirst, turn back to the report ofthe certified public accountant.This third-party auditor will tellyou right off the bat if Galactics

    report conforms with generallyaccepted accounting principles.

    Insights into the futureWatch out for the words subjectto. They mean the financialreport is clean only if you takethe companys word about a

    particular piece of business, andthe accountant isnt sure youshould. Doubts like this areusually settled behind closeddoors. When a subject tomakes it into the annual report, itcould mean trouble.

    On the positive side, achairmans letter should give youinsights into the companysfuture and its stance on theeconomic or political trends thatmay affect it.While youre up front, look forwhats new in each lines ofbusiness. Is managementgetting the company in goodshape to weather the tough and

    competitive 1980s?What else should you knowbefore you check the numbers?Nowand no soonershouldyou dig into the numbers!Stay in the back of the book and

    go the footnotes. Yep! Thewhole profits story is sometimesin the footnotes.

    On source is the balance sheet.It is a snapshot of how thecompany stands at a single pointin time. On the left are assetseverything the company owns.Things that can quickly beturned into cash are currentassents. On the right areliabilitieseverything the

    company owes. Current liabilitiesare the debts due in one year,which are paid out of currentassets.

    Are earnings down? If its onlybecause of a change inaccounting, maybe thats good!The company owes less tax andhas more money in its pockets.

    Are earnings up? Maybe thats

    bad. They may be up because ofa special windfall that wonthappen again next year. Thefootnotes know.

    For what happened and why? The difference between currentassets and current liabilities isnet working capital, a key figureto watch from one annual (andquarterly) report to another. Ifworking capital shrinks, it couldmean trouble. One possibility:the company may not be able to

    keep dividends growing rapidly.

    Now turn to the letter from thechairman. Usually addressed toour stockholders, its up front,and should be in more waysthan one. The chairmans tonereflects the personality, the well-being of his company.

    In his letter he should tell youhow his company fared this year.But more important, he shouldtell you why. Keep an eye out forsentences that start with Exceptfor and Despite theTheyre clues to problems.

    Look for growth hereStockholders equity is thedifference between total assetsand liabilities. It is the presumeddollar value of what stock-holders own. You want it togrow.

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    Financial analysts work outmany other ratios to tell themhow the company is doing. Youcan learn more about them frombooks on the subject. Ask yourlibrarian.

    Another important number towatch is long-term debt. Highand rising debt, relative to equitymay not be the problem for agrowing business. But it showsweakness in a company thatsleveling out. (More on that later.)

    University of San Francisco, Priscilla A. Scotlan Career Services Center, 02/03, ALJ

    The second basic source of

    numbers is the incomestatement. It shows how muchmoney Galactic made or lostover the year.

    Most people look at one figurefist. Its in the income statementat the bottom: net earnings pershare. Watch out. It can fool you.Galactics management couldboost earnings by selling of a

    plant. Or by cutting the budgetfor research and advertising.

    (See the foot-notes!) So dont besmug about net earnings untilyouve found out how theyhappenedand how they mighthappen next year.

    Check net sales firstThe number should look at firstin the income statement is netsales. Ask yourself: Are salesgoing up at a faster rate than thelast time around? When salesincreases start to slow, thecompany may be in trouble. Alsoask: Have sales gone up fasterthan inflation? If not, thecompanys real sales may bebehind. And ask yourself oncemore: Have sales gone downbecause the company is selling

    off a losing business? If so,profits may be soaring.

    (I never promised you thatfiguring out an annual report wasgoing to be easy!)

    Get out your calculator But one thing you will neverlearn from an annual report is

    how much to pay for acompanys stock. Galactic maybe running well. But if investorsexpected it to run better, thestock still might fall. Or, Galacticcould be slumping badly. But ifinvestors see a better daytomorrow, the stock could rise.

    Another important thing to study

    today is the companys debt. Getout your pocket calculator, andturn to the balance sheet. Dividelong-term liabilities bystockholders equity. Thats thedebt-to-equity ratio.

    A high ratio means that thecompany borrows a lot of moneyto spark its growth. Thatsokayif sales grow, too, and iftheres enough cash on hand tomeet the payments. A company

    doing well on borrowed moneycan earn big profits for itsstockholders. But if sales fall,watch out. The whole enterprisemay slowly sink. Somecompanies can handle highratios, others cant.

    Two important suggestionsThose are some basic weighinga companys health from itsannual report. But if you want to

    know all you can about acompany, you need to do a littlemore homework. First, see whatthe business press has beensaying about it over recentyears. Again, ask your librarian.

    Finally, you should keep up withwhats going on in business,economics and politics here andaround the world. All canandwill-affect you and thecompanies youre interested in.

    You have to compareThat brings up the mostimportant thing of all: Oneannual report, one chairmansletter, one ratio wont tell youmuch. You have to compare. Isthe companys debt-to-equityratio better or worse than it usedto be? Better or worse, after thisrecession? In company-watching, comparisons are all.They tell you if management isstaying on top of things.

    Each year, companies give youmore and more information intheir annual reports. Profitingfrom that information is up toyou. 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 ProfessionalsKennedy, J., (1996) Job Interviews for Dummies*Messmer, M., (1999) Job Hunting for Dummies*Pinkley, R. & Northcraft, G., (2000) Get Paid What Youre Worth: theExpert Negotiators Guide to Salary and CompensationPorot, D., (2001) 101 Salary Secrets: How to Negotiate Like a Pro

    *Available in CSC Resource Library