EPISODE A6.009 Retained Earnings Reinvestment in the Business

RESULTS RADIO..."Let's Grow Together"

Introduction
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Show Objectives - The Why
This sounds a little esoteric and is, but it is a powerful concept appropriate for any business owner at Stage VI. In fact if you are making the transition from owner to executive, this is one of several transformational experiences.

Key Issues - Owner/Manager Perspective:

1. ​Assuming reinvestment is the right decision - what is the best choice - Buy, rent, or Lease?

What You Need to Know - The What

• Hurdle Rate: if the investment made where it has the hugest rate of return, what must this investment equal or exceed?
• Payback Period: amount of time it will take to recover the costs for build, test, improve, release?
• Rate of Return: when the investment reaches full capacity, what does it return beyond the investment?
• Total Life Cycle Value: how long will the investment run before it is discontinued?

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What You Need to Do​​ - The How

1. The reason for the investment.
   1. Poor Assessment?
   2. Grow Rate?
2. ROI from Investment
   1. Sales divided by Investment = Turnover
   2. Earnings divided by sales = Earnings as Percent of sales
   3. Earnings as % of Sales X Turnover = ROI
3. Buy, Rent, or Lease?
   1. Impact on Working Capital
   2. Appreciating or Depreciating
   3. Generates Revenue
   4. Finance or Lease

Shows

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