Part Six
TOOLBOX
A STEP-BY-STEP GUIDE TO ANALYZING CAPITAL EXPENDITURES
You’ve been talking with your banker about getting a loan for a new piece of equipment for the plant, or maybe for a new marketing campaign. He’s receptive, but he wants more data. “Sounds good,” he says. “Write me up an ROI analysis. I’ll look at it as soon as it’s ready.”
Don’t panic. Here’s a step-by-step guide to preparing your proposal:
- Remember that ROI means return on investment—just another way of saying, “Prepare an analysis of this capital expenditure.” The banker wants to know whether the investment will generate enough cash so that you can pay back the loan and still create value for your company.
- Collect all the data you can about the cost of the investment. ...
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