CAPEX NEEDS VERSUS CAPITAL ALLOCATION OPPORTUNITIES
Economics is the study of resource allocation. Economic value comes from allocation decisions. Nobel Prize–winning economist Paul Samuelson wrote, “Economics is a choice between alternatives all the time. Those are the trade-offs.”* Value is either created or destroyed by those decisions. It isn’t until later that it becomes apparent whether they are the right decisions or not. Regardless, it’s at the decision point that value is essentially created or destroyed. What happens afterward is merely the consequence of that decision.
In manufacturing companies, resource allocation is capital allocation. ...
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