The CapEx Cycle

Business & Management
#1

Several economists, notably Irving Fisher, have observed that business cycles move in lockstep with companies’ efforts to meet ever-changing customer demand. When the economy is doing well, consumers are buying, and financing rates are low, management teams frequently want to take advantage of the situation by increasing output. Initially, this results in increased sales and reasonable returns on invested money (ROIC). Later on, the rivalry becomes more intense, and greed begins to take its toll. Supply eventually outstrips demand, prices fall, early debt binges become more difficult to pay, and businesses are forced to lay off employees.