Reinvesting in the Business
» Reinvesting in the Business, Volume 3, Issue 3, 2003
When I use the term MAJOR investment in your business, I mean an investment or series of investments where the total purchase price amounts to around 5 percent or more of your annual gross receipts.
If respondent makes MAJOR investments in the business AND uses the rate-of-return to assess their viability.
7c. Do you use the accounting rate-of-return or the discounted cash flow method?
| Response | ||||
|---|---|---|---|---|
| 1 | Accounting rate-of-return | 42 | ||
| 2 | Discounted cash flow | 37 | ||
| 3 | DK/Refuse | 21 | ||
| Total (%) | 100 | |||
| N | 230 | |||
Notes: Forty-two (42) percent of small employers who make major business investments and use a rate-of-return calculation to assess an investment use the accounting rate-of-return, i.e., average net income divided by average book value of the investment (Q#7c).
