The certainty with which the long-term economic characteristics of the business can be evaluated;
The certainty with which management can be evaluated, both as to its ability to realise the full potential of the business and to wisely employ its cash flows;
The certainty with which management can be counted on to channel the rewards from the business to the shareholders rather than to itself;
The purchase price of the business; and
The levels of taxation and inflation that will be experienced and that will determine the degree by which an investor's purchasing-power return is reduced from his gross return.
- Should we conclude from this similarity that the competitive strength of Coke and Gillette gains them nothing when business risk is being measured?
- Or should we conclude that the risk in owning a piece of a company - its stock - is somehow divorced from the long-term risk inherent in its business operations?