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Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers by Joe Knight, Karen Berman

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24

Figuring ROI

The Nitty-Gritty

Capital expenditures. Cap-ex. Capital investments. Capital budgeting. And of course, return on investment, or ROI. Many companies use these terms loosely or even interchangeably, but they’re usually referring to the same thing, namely the process of deciding what capital investments to make to improve the value of the company.

In most entrepreneurial companies, resources for capital expenditures are limited, and there’s a lot of competition for what little is available. “This manager wants a new software application,” says Paul Saginaw of Zingerman’s, a specialty food company. “This manager wants a new mixer, this manager wants a new oven, and this manager wants a new POS [point-of-sale] system. In order to make ...

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