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Chapter 16. Value Investing: The Process > Step 6: Management Quality

Step 6: Management Quality

Key Executive and Board Quality

ATI's CEO, K.Y. Ho, was one of the company's founders. The company had a small board of directors with only five members. Except for the CEO, all directors were from outside the company, and one of those was the founder of Silicon Optix, another chipmaker. The small board was a negative, and not much information was available on company officers. I rated ATI's key executive and board quality as fair.

Clean Accounting/Earnings Growth Stability

The clean accounting test totals the firm's one-time charges or nonrecurring charges found on its annual income statements and compares that total to annual sales. The test judges a firm's accounting as clean if the nonrecurring charges' percentage of sales averaged less than 3 percent over the past five years.


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