Evaluate management's ability to allocate capital efficiently from "summary" of The Little Book That Builds Wealth by Pat Dorsey
To assess management's ability to allocate capital efficiently, investors need to look at how well a company deploys its resources to generate returns. One key metric to consider is return on invested capital (ROIC), which measures how effectively a company uses its capital to generate profits. Companies with high ROIC tend to have a competitive advantage and create value for shareholders. Another important factor to consider is the company's track record of capital allocation decisions. By examining past investments and acquisitions, investors can get a sense of management's ability to create value through capital allocation. Companies that consistently make smart capital allocation decisions are more likely to generate ...
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