If a company spends money on itself, that money isn’t profit. Profit is the money left over which the business has no better use for (usually decided as being excess by people who will share in the profit when it is distributed)
And this line of thought is one of many ways how companies avoid taxes despite raking in ungodly amounts of money. Instantly throwing “all” that potential profit into expansion.
‘We didn’t make any profit for the past 5 years. Yes, we have grown the company 5000% since we started but we’ve made no profit, so wages will stagnate. In fact, we might have cut some positions if the stakeholders don’t see some profits soon.’
If a company spends money on itself, that money isn’t profit. Profit is the money left over which the business has no better use for (usually decided as being excess by people who will share in the profit when it is distributed)
And this line of thought is one of many ways how companies avoid taxes despite raking in ungodly amounts of money. Instantly throwing “all” that potential profit into expansion.
‘We didn’t make any profit for the past 5 years. Yes, we have grown the company 5000% since we started but we’ve made no profit, so wages will stagnate. In fact, we might have cut some positions if the stakeholders don’t see some profits soon.’
Or worse: “invest” it in stock buy-backs and thus allow shareholders to realize the profits indirectly anyways.
But that doesn’t invalidate the original observation that investments into the company and maintenance costs are not paid from profits.