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Perhaps it’s less the cost of capital, and more the relative return. If I can only get a 10% return from a manufacturing investment, but I can get 20% in financ
by fastaguy88 5y ago
Perhaps it’s less the cost of capital, and more the relative return. If I can only get a 10% return from a manufacturing investment, but I can get 20% in finance or technology, why would I settle for 10%. The thing that puzzles me is, if all that money is flowing into the 20% industry, why don’t the returns go down?
- kevin_thibedeau 5y agoWhy would a grocery store bother with selling food when they only get 3% margin?
- wrycoder 5y agoVolume.
- ipaddr 5y agoVolume/real estate
- throwaway210222 5y agoBecause large grocery store chains are not in retail - they are in finance. They make a fortune with the cash they get at the tills (net-0) before they pay it to their suppliers (net-60, net-90).
- jon_richards 5y agoYou need to annualize that 3% to make it comparable. A grocery store isn’t buying everything at the start of the year and selling it at the end. If they do 12 inventory turnovers in a year, that 3% margin becomes a 36% return for the same amount of capital.