Chapter 2. Countercycling Your Capital Expenditures
“… though a countercyclical investment strategy was observed to enhance profitability, few firms practiced this strategy.”
—Professors David Aaker and Briance Mascarenhas1
Rather than profitably build up companies through the kind of “countercyclical investment strategy” described by Professors Mascarenhas and Aaker, many executive teams pursue just the opposite course. However, nothing can get a company into more trouble than ramping up an overleveraged capital-expansion program into the teeth of a recession. Such an overaggressive capital expansion creates large cash flow needs to service an ...