Munger and Buffett are very focused on both the magnitude and persistence of the ability of a business to earn a return on capital. Return on invested capital (ROIC) is the ratio of after-tax operating profit divided by the amount of capital invested in the business. In short, how much a business earns on the capital employed in its business determines the quality of that business for Munger and Buffett. Growth of the business is, by itself, neither good nor bad. In the same 1992 letter, Buffett wrote: Growth benefits investors only when the business in point can invest at incremental returns
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