He made 11% on YOUR money, the money you put in. You would have made 10%. Sure if he wanted to make 11% again next year, he’d have to borrow again next year, but so what, as long as he’s making a positive return.
Hi Saul,
I understand why you are not getting it. You are focusing on one year. If we look at just one year then we are not talking about annual growth in earnings. By definition earnings growth requires the difference between year and another.
The point is about growth, and how growth is related to investment. In order to understand that we need an example that shows earnings growth and the investment needed to fund that growth – from year 1 to year 2, and then from year 2 to year 3. That was the example I used, but perhaps together we can come up with another one that will be clearer.
Thanks,
Ears