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Homework Help: Determining the most efficient use of capital ?

  1. Jul 20, 2012 #1
    How would I calculate which of the 2 options is the most efficient use of the capital?


    With $5,000 of capital ...


    1.) I can purchase and resell 20 units for a $1000 profit

    2.) I can purchase and resell 200 units for a $1500 profit


    Obviously option #2 is the most profitable but also requires 10x the work. Option #1 has a better profit margin, but less return on investment.

    Outside of determining which aspect is more important that the other, is there a way to determine which is the most efficient use of the capital with the given information? ..or am I missing another variable ?
     
  2. jcsd
  3. Jul 20, 2012 #2

    jedishrfu

    Staff: Mentor

    Consider the work involved, ie assign an hourly rate of x dollars, or use a commission per item sold rate.
     
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