The Lohmann-Ruchti Effect in the Development of Corporate Capital

Knowledge of the measure of cash flow and of the dynamics of its creation is indispensable for a thorough understanding of many business phenomena, especially those linked to the growth of a company. Of particular interest are the relations between depreciation and the production of cash flow. This paper will examine the financial effects of the depreciation produced by the expansion effect known as the Lohmann-Ruchti Effect, according to which the systematic re-investment of the cash flow from the annual asset depreciation generates a process of growth in the invested capital without the need to rely on outside funds, debt or equity.