Charlie Munger: Good Businesses Earn a Lot and Spend Little
What kind of business is a good business? Read on and you’ll fully understand why some companies become cash-strapped the more they grow, while others become richer and richer. When you invest, do you ever have this question: This company looks very profitable, so why doesn’t it have much cash on its books? One of the biggest reasons is that it plows most of the money it earns back into the business—building new factories, upgrading equipment—so in the end, of course, there isn’t much left in its own pocket. That’s a typical bad business. It looks profitable, but in reality it hasn’t earned anything. ...