How Much Should I Reinvest in a Business?
How Much Should I Reinvest in a Business?
Suppose you invest in a business and receive some return. What do you do with it? On the one hand you could just leave it as cash (or in whatever form it is), or you could use that return to reinvest in the same business and expect it to give you a larger return.
The consideration here is: if you reinvest too little, the increase in profit would be small; if you reinvest too much, then you would have very little actual income in your hands. So what percentage of your investment return should be used for reinvestment? This Demonstration does this calculation.