Going For Growth: Debt, Rate-of-Return & Business Risk

All businesses make investments in both plant and equipment, and also in their employees. Depending on the type of enterprise, some businesses will have more invested capital than others. For example, a manufacturing oriented business will have substantially more hard physical capital invested than one devoted to service. No matter the type of business, the primary question remains the same. The question is— what is the purpose (or goal) of any business investment? The answer— the purpose of any investment is to increase the net worth of that investment. Then, how do you accomplish this? This is accomplished by maximizing the return on invested capital. Unfortunately, therein lies the rub. By maximizing your rate-of-return on invested capital you also maximize your business risk—- and also your competition. If you wish to shoot for high returns, then you have to accept a higher level of risk. If you can concisely take all the wisdom in the world and melt it down to a single sentence, it would read — there is no such thing as a free lunch. (Although, at times, it is possible to transfer the cost to someone else.) Sanford Kahn is a Business Author and Professional Speaker. For more information on my programs please contact me at www.businesstrendspeaker.biz/contact-me