Letters by Topic
Letters on Capital Allocation
How a company's management deploys its free cash flow—reinvesting, acquiring, paying down debt, or returning capital to shareholders—is the single most important driver of long-term shareholder returns.
1984·The discipline of retaining versus distributing earnings
Retained earnings should remain in the business only if they can be reinvested at returns above the cost of capital; otherwise they belong to shareholders.
2014·Acquisition discipline and capital deployment
Acquisitions must clear a high bar: a business we understand, run by able and honest people, available at a sensible price.
Explore the concept
Capital Allocation is one of the ideas behind the ValueOS tools. See it applied to real companies.