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From Maruti to Infosys to Bharti, most market leaders eventually get the capital cycle wrong

Maruti’s woes are not unique. Like auto, IT and telecom industries have seen the ill effects of mistimed capital allocation. Most companies see the good times as an invitation to bulk up on assets and are overly optimistic about future returns.
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pravin
26 Sep 2019 8 Mins Read 3 comments
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The lack of skill that many CEOs have at capital allocation is no small matter: After 10 years on the job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business. – Warren Buffett in
written by James McTaggart, Peter Kontes, and Michael Mankins. The book describes four principles of resource allocation that can help. Of the four, two really stand out. A smart investor knows that more capital deployment makes sense only if the return it generates increases. Everything else is just trouble waiting to happen. ( Graphics by Sadhana Saxena)
The lack of skill that many CEOs have at capital allocation is no small matter: After 10 years on the job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business. – Warren Buffett in written by James McTaggart, Peter Kontes, and Michael Mankins. The book describes four principles of resource allocation that can help. Of the four, two really stand out. A smart investor knows that more capital deployment makes sense only if the return it generates increases. Everything else is just trouble waiting to happen. ( Graphics by Sadhana Saxena)

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