Järnandel

Järnandel is a Swedish term that translates to "iron share" or "iron dividend." It refers to the portion of a company's profits that is reinvested back into the business for the purpose of maintenance and replacement of existing assets, rather than being distributed as dividends to shareholders. This concept is closely related to depreciation, but it specifically focuses on the *actual cost* of replacing worn-out or obsolete equipment and machinery.

Companies may choose to retain earnings for this purpose to ensure their operational capacity remains intact and competitive. By reinvesting in its infrastructure, a company can avoid a decline in productivity or the need for significant, disruptive capital expenditures in the future. This strategy is often employed in industries with heavy machinery or high rates of technological obsolescence, such as manufacturing or transportation.

The idea behind järnandel is that the value of a company's physical assets should be maintained over time. If a company consistently distributes all its profits and doesn't account for the eventual need to replace its capital stock, its productive capacity will diminish, negatively impacting its long-term profitability and sustainability. Therefore, setting aside a portion of profits as järnandel is a prudent financial practice for preserving the company's core operational strength.