capital allocation
Deploying financial resources
Capital allocation is how organizations distribute financial resources among competing uses—reinvesting in operations, paying dividends, acquiring other companies, reducing debt, or buying back shares.
The term appears most in corporate finance and investment contexts: The CEO's capital allocation decisions favor growth over dividends.
Good capital allocation means putting money where it generates the highest returns.
- portfolio managementOverseeing investment holdings strategically
- equity investmentsPurchased corporate ownership shares
- budgetingAllocating funds systematically
- cash flowMoney entering and exiting
- balance sheetAssets-liabilities-equity report
hurdle rate · weighted average · opportunity cost · risk assessment · risk management · cost-benefit analysis · diversification · shareholder interests · skin in the game · financial modeling · private equity · dry powder · investment · strategic planning · boardroom · fiduciary duty · expense tracking · resources
capital allocationoperating expenses
Routine business costs
malinvestment · consumption · cash hoarding · financial neglect · cash burn
capital allocationdivestiture
Disposal of assets
deleveraging · liquidation · share buyback · disinvestment · share buybacks
capital allocationfinancial mismanagement
Improper handling of funds
squandering · profligacy · reckless spending · malinvestment · resource depletion