Small business books and manuals explain the formula used to determine whether additional debt increases the return for investors commonly known as return on investment (ROI).
Return on Investment
There are two forms of investment, that at the investor level (stock purchase) and at the business level (investment into a new plant). Return on Investment (ROI) reflects the financial reward earned related to that investment. It is usually provided in annual yield.
In your typical business operation, turning the inventory over as often as possible has several benefits. First, it generally reduces overall costs, secondly, it generates greater profits and third, by increasing the profitability, the company has a greater return on equity. OK, this seems all well and good, but does turning the inventory over in the house flipping business as fast as possible generate the same benefits?