| Investors/entrepreneurs are attracted to businesses that show promise to be profitable, and turn away from making investment in unprofitable businesses. This is a basic economics principle - I'm not assuming anything. I cited hospitals as an example to illustrate this, because there are many stats, such as what I posted (not an assumption, but a study), which show it's not a very profitable business (relative other businesses) - and btw, neither is health insurance. If you disagree, then look it up in a basic economics or finance textbook, here are a few explanatons of the relationship of investment, profitability and ROI: "In other words, profit-seeking businesses operating in the private sector of the economy will be prepared to go ahead with an investment if they believe that the project will over its projected lifetime yield a real rate of return greater than if the money tied up in an investment project had been invested in the next best alternative way." Macroeconomics - Capital Investment
http://tutor2u.net/economics/revision-notes/a2-macro-capital... "The owners of a company and the company’s creditors share a similar goal: to increase wealth. They are thus very concerned about profitability in all phases of operations. Creditors are specifically concerned that the company use its resources profitably so that it can pay interest and principal on its debt. Owners are concerned that the company be profitable so that stock values will increase. Company managers must show they can manage the owners’ investment and produce the profits that owners and creditors demand. Because top management must meet the profit expectations of company owners, it passes down to the lower levels of management those profitability goals, which are then spread throughout the company. All managers, therefore, are expected to meet profitability goals, which are often increased and tightened as each level of management seeks a margin of safety." PDF - The Importance of Return on Investment: ROI
http://media.wiley.com/product_data/excerpt/50/04712037/0471... |