What makes a company great?
It is not rapid growth.
It's not landing on a best-of-the-year list.
Rather, it is the ability to generate high returns on capital.
Suppose you decide to open a business. The money you spend building the business is your capital.
Whether the business is a good investment depends on how much profit you make as a percentage of that capital.
If you earn a profit of $10,000 in a given year and you've invested $100,000 in building the business, you've made a 10% return on your capital.
Not spectacular, but better than a savings account.
It is not rapid growth.
It's not landing on a best-of-the-year list.
Rather, it is the ability to generate high returns on capital.
Suppose you decide to open a business. The money you spend building the business is your capital.
Whether the business is a good investment depends on how much profit you make as a percentage of that capital.
If you earn a profit of $10,000 in a given year and you've invested $100,000 in building the business, you've made a 10% return on your capital.
Not spectacular, but better than a savings account.
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