Part 2: How to define a good business?

To continue on financial analysis:

6. Cash on hand
While the company makes its profits, it is important that the management has a strong control over its cash holdings and increase it gradually. It also indicates a strong cash flow in case the company needs any future expansion or diversification. I will talk about diversification later.

7. Share buyback from directors
This is a vote of confidence from the management when they do this. They will have to report this when they do a share buyback and another factor when they do this is the company itself will then hold more of its shares. You will be wondering how this affects investors.
This share buyback will affect the earnings per share for the company. 1 simple illustration will be for example, the open market shares is at 100 shares and earnings was $100, thus earnings is $1 per 1 share. Now, due to the share buyback, open market shares become 80 shares instead, thus this results in earnings of $1.25 per 1 share. As an investor, we are investing in the company as though you are an owner, thus the more shares you hold, it only means the more you should earn as a business owner.

8. Dividends
Personally, I like money coming to my pocket every now and then from companies, but I rather they re-invest the money into the company to grow capital because dividends incur tax. Using this money to grow capital and in the medium and long run incurring capital gains, won't that be even better ?