Chapter 2 Returns on Capital: Putting Cash to Work

The investor is primarily concerned with calculating a rate of return on invested capital. “How much did I invest and how much did I take out? How long did it take? What is my return?” In comparison, the corporation looks at a range of “performance” returns in a much different manner. From a corporate perspective, use of capital and cash are more important than to the individual.

The two—individual investors and corporations—both want to maximize their available capital, and both are concerned with profitability. As an investor, you expect your capital to grow due to expanded market value. As a corporation, the expectation is based on profit and loss and how well that is accomplished. Corporate ...

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