The ins and outs of capital expenditure

The stock market presents investors with a paradox, for while it can be hard to put it all into practice, the basic principles are mostly pretty straightforward. One of the most important of these is "be very wary of capital-intensive businesses".A capital-intensive business earns a relatively small return on the assets its owns – and has to spend a large portion of that profit on maintaining and enhancing those assets.Before a bread manufacturer can make a loaf, for example, it will need to buy dough-mixers and an oven – and it will need to spend money each year to maintain...

The stock market presents investors with a paradox, for while it can be hard to put it all into practice, the basic principles are mostly pretty straightforward. One of the most important of these is "be very wary of capital-intensive businesses".

A capital-intensive business earns a relatively small return on the assets its owns – and has to spend a large portion of that profit on maintaining and enhancing those assets.

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