For example, let’s say we have two businesses, each earning $1 million in profit. One has $5 million in assets. That’s the good business. The other has $20 million in assets. That’s the bad business. We can invest in the good business, we can invest in the bad business, or we can leave our money sitting in long-term bonds. Return on Capital: High Profitability Is Worth More The good business earns 20 percent on its $5 million in capital ($1 million ÷ $5 million = 20 percent). The bad business earns 5 percent on $20 million ($1 million ÷ $20 million = 5 percent). The long-term bonds yield 10
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