Capital Allocation

Morgan Stanley

Michael Mauboussin, Dan Callahan

Research

88 Pages

Michael Mauboussin updates his 2022 study of how public companies in the U.S. spend money. This extensd most of the analysis back to 1970, updates the data through 2024, and discusses results for the first half of 2025 where practicable.

Date Published: November 5, 2025

Key Takeaways

Internal funding dominance: Most investment is financed by operating cash flows, with external capital availability highly cyclical.
Value oriented decisions: Focus on price versus value, return on incremental capital, and zero based allocation improves outcomes.
Practical assessment: Eight alternatives are benchmarked and a checklist guides evaluation of incentives and past spending patterns.
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