2007-06-17 08:31:36 · 7 answers · asked by Lillpill 2 in Business & Finance ➔ Investing
In a free enterprise system investing performs two very important functions.
First, the ability to invest money in securities or in a new company allows for the formation of more firms than would be possible simply with bank loans. Small companies are important employers in our economy.
Second, the act of investing means that capital is being allocated by those with the money to invest in businesses that they deem worthy. It is that allocation of capital that is the hallmark of a free enterprise system.
To the extent that allocating capital through investing is done in a disciplined manner, say through the use of security analysis, the results can be quite encouraging for both the investor and the economy. That is why War ren Buffett has said on occasion that Ben Graham's book (with Dodd) on Security Analysis was one of the most important finance books ever written.
2007-06-18 05:39:21 · answer #1 · answered by Anonymous · 0⤊ 0⤋
It's part of the definition / prerequisites of Free Enterprise (like Rule of Law, Property Rights, means of free exchange, and so on).
If you don't have Investors (or the means of exchange) then what you have is not Free Enterprise
2007-06-18 00:44:08 · answer #2 · answered by Steve B 7 · 0⤊ 0⤋
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2015-01-27 12:01:49 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You have a brilliant idea, but not enough cash to execute it. You find a thousand people to invest $1000 each in your company in return for a share of your success. Now you have a million bucks to build your widget factory and start making & selling a million widgets a week at $1 each. You employ 100 people, you generate $1,000,000 a week in sales, you make great widgets (so your customers are happy), pay great wages, (so your workers are happy), and pay a dividend to your investors!
Everybody smiles!
2007-06-17 08:48:08 · answer #4 · answered by Anonymous · 0⤊ 0⤋
All businesses require capital to start up. As long as the business can make enough to pay all it's costs and wages and at the same time pay back the investment plus interest at the same time, you have a win-win situation.
2007-06-17 08:35:41 · answer #5 · answered by R.E.M.E. 5 · 1⤊ 0⤋
Free enterprise means no or low barriers to entry & exit.
If people can not invest there are barriers to entry.
2007-06-18 04:10:16 · answer #6 · answered by Anonymous · 0⤊ 0⤋
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2016-04-30 16:12:47 · answer #7 · answered by ? 3 · 0⤊ 0⤋
It is becoming less so. we are now in a knowledge economy, where the skills of people differentiate. Barriers to entry for many businesses are skills not capital..
e.g. web design, marketing skills, brand design.
2007-06-17 10:38:23 · answer #8 · answered by Anonymous · 0⤊ 0⤋
you will need investors that are interested in what you are doing to help finance you or you will fall flat on your face. Good luck.
2007-06-17 08:53:49 · answer #9 · answered by laverne_marble 1 · 0⤊ 0⤋