This is a companion case sequence to The Expertise of Capital in Business series on Commoncog.
In the context of business, expertise with Capital comes up in three broad forms:
The ability to raise it. There are three broad ways that companies can raise capital: they can sell equity, raise debt, or reinvest retained earnings. All three demand expertise. As you’ll soon see, there is a richly creative palette that operators may use for each of these tools.
The ability to spend it well. This is known as ‘capital allocation’. There are only five options: you reinvest in your business, you spend it on mergers and acquisition, you pay down debt (if you have it), you buy back shares, or you issue a dividend. How well a CEO makes these allocation decisions with the cash the business generates will determine the long-term enterprise value of the company.
The ability to wield Capital in service of moves in Operations or against competitors in one’s Market. This is where it gets tricky — Capital can be an enabling weapon, and may be used against competitors, or as a method to shore up operations.
The following series of cases will showcase one or more of the above aspects of Capital expertise.