Some capital expenditures do not have a clear and quantifiable ROI, but they are still important. This list includes furniture, office equipment and computers, and pens of course since all the good pens keep mysteriously disappearing.
Unless you are Don Draper, you probably do not need a plush chaise lounge and a fully stocked bar in your office. You will also want a computer that will last, but do you really need the latest, fanciest gadget?
Other capital expenditures, such as plant equipment, directly result in revenue generation. These types of expenses are easy to justify via ROI, but that does not mean you should rationalize your way into overspending.
Most growing businesses go through an accelerated growth phase, then it slows, then it plateaus. The cycle may or may not be repeated but it is a common pattern.
Over the full cycle the need for capital expansion and the ability to fund it internally move, perversely, in opposite directions.
This is, of course, exactly when they do not have the money to fund it. This is why it is important to spend money wisely on CapEx (well, on anything really). Investing too much, in the wrong technology, or not staying current can be deadly.
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