Pay attention to a company's return on invested capital from "summary" of The Little Book That Builds Wealth by Pat Dorsey
Return on invested capital is a crucial metric to consider when evaluating a company's potential for creating wealth for its shareholders. This metric essentially measures how efficiently a company is able to use its capital to generate profits. By focusing on this key indicator, investors can gain valuable insights into a company's ability to generate sustainable returns over the long term. Calculating return on invested capital involves dividing a company's operating income by its total invested capital. This provides investors with a clear picture of how well a company is utilizing its resources to generate profits. A high return on invested capital indicates that a company is able to generate significant returns on the capital it has invested, which is a positive sign for investors...Similar Posts
Buy what you know and understand
The key to successful investing is understanding the companies you're investing in. This may seem like a simple concept, but it...
Continuously improve your investment skills
As investors, it is crucial to constantly work on honing our skills. The stock market is ever-changing, and to stay ahead, we m...
Dividendfocused investing can provide capital appreciation and income
Dividend-focused investing is a strategy that involves purchasing shares of companies that pay out dividends to their sharehold...
The cost of capital influences investment decisions
In making investment decisions, firms must carefully consider the cost of capital. This concept represents the return that inve...
Index funds are a reliable investment option
Index funds are a simple and straightforward investment option that can provide reliable returns over the long term. By trackin...
Evaluate a company's growth prospects and market share
When analyzing a company's growth prospects and market share, it is important to first consider the industry in which the compa...
Buffett looks for businesses with consistent and predictable cash flow
Warren Buffett's investment strategy is centered around seeking out businesses that exhibit a reliable and steady stream of cas...
Think like an owner when investing in a company
When considering an investment in a company, it is important for the investor to adopt the mindset of an owner. This means look...
Investing is a longterm endeavor
Investing is not a get-rich-quick scheme, nor is it a game that can be won overnight. It is a long-term endeavor that requires ...
Learn from mistakes and use them as opportunities for growth
Mistakes are an inevitable part of life, and investing is no exception. When we make mistakes, it is crucial to not dwell on th...