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A Refresher on Cost of Capital

Harvard Business Review

You’ve got an idea for a new product line, a way to revamp your inventory management system, or a piece of equipment that will make your work easier. You’ll likely be asked to show that the return on the investment will be better than your company’s cost of capital. What is the cost of capital?

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

What have been less explored are the specific actions taken by private equity (PE) fund managers. In a survey of 79 PE firms managing more than $750 billion in capital, we provide granular information on PE managers’ practices and how firms’ strategies relate to the characteristics of their founders.

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Should Companies Retain "Strategic" Cash?

Harvard Business Review

Strategic cash usually is invested in high quality short-term securities; this ensures safety and liquidity, but produces a meager return on investment—especially in a low interest rate environment—and does not achieve the company's cost of capital. How Should You Approach Strategic Cash?

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The Most Common Mistake People Make In Calculating ROI

Harvard Business Review

But before anyone writes a check, you need to calculate the return on investment (ROI) by comparing the expected benefits with the costs. Analyzing ROI isn’t always as simple as it sounds and there’s one mistake that many managers make: confusing cash and profit. Determine the minimum return required by your company.

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An HBR Refresher on Breakeven Quantity

Harvard Business Review

“It’s one of the more popular ways that managers calculate marketing ROI,” says Avery, pointing out that other common ones include calculating the investment payback period, calculating an internal rate of return, and using net present value analysis. How do you calculate it? BEQ = 200 units.

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The Comprehensive Business Case for Sustainability

Harvard Business Review

These require sophisticated, sustainability-based management. Yet executives are often reluctant to place sustainability core to their company’s business strategy in the mistaken belief that the costs outweigh the benefits. ” Improving risk management. billion in mining projects since 2010. Fostering innovation.