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Earning Power
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles
J Woelfel
(We recommend this as work of authority and you can order
it here)
The
ability of a business consistently to employ its capital profitably over
a period of time. When profits
show a reasonable return on invested capital and are sufficient also to
provide for a high standard of maintenance of properties and necessary
plant extensions, the concern is said to have a demonstrated earning power. Demonstrated earning power is the best test of the BUSINESS
RISK in passing upon an application for a loan.
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