Question

Thus chapter distinguishes between good and bad growth. How do they differer, and why does the distinction matter?

Answer 1

Quoting from the chapter, “Good growth occurs when the company invests in activities offering returns in excess of cost, including the cost of capital employed. Good growth benefits owners and is rewarded by a higher stock price and reduced threat of takeover. Bad growth involves investing in activities with returns at or below cost…a bad growth strategy wastes valuable resources — and stock markets are increasingly adept at distinguishing between good and bad growth, and punishing the latter.”