Did E.P. Smith anticipate anything in the paper other than the definitions of value/wealth?
John M. Legge wrote:
> Doug Henwood wrote:
>
> >
> >I say there, and I'll say again, that Jensen is really onto something in
> >his argument about free cash flow - that mature corporations throw off more
> >cash than they can reinvest at a "satisfactory" rate of profit.
> >
>
> I don't think that Jensen has "discovered" anything (but if you give
> reference with date I can be sure). Simple statics prove the point: during
> investment phase cash flow is negative as plant is constructed, equipment
> bought, products designed and market established. Once firm/industry
> matures then cash flow turns positive.
>
> a) if there was no prospect of positive cash flow after investment phase
> was complete, then investment would not have been made in first place
> b) funds for investment can only come out of cash surplus generated by
> mature companies
>
> Too much concentration of long run equilibrium clearly rots the mind.
>
> JML
-- Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu