“Capital allocation is always important but is especially pertinent in the United States today given the high return on invested capital, modest growth, and substantial cash on corporate balance sheets. Companies that deploy capital judiciously have a significant opportunity to build value,” writes Michael J. Mauboussin, managing director and head of Global Financial Strategies at Credit Suisse Group AG (ADR) (NYSE:CS).
Mauboussin has a lot of practical advice on how executives should approach capital allocation in his recent deep dive on the topic. But he also gives investors a five-point framework (partly based on principles in The Value Imperative by James McTaggart, Peter Kontes, and Michael Mankins) to decide is a company’s management is taking the right approach.
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