Don’t quite grasp the idea do ya?
States, and lots of small businesses operate this way.
Car dealerships.
No loans
No sales
No commission
Lies, no solid company operates in this manner. Pure bull shit and a scare tactic to get the $
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Car dealerships.
No loans |
EXACTLY.
I already did this thread.
I guess credit is a way to keep shitty businesses running.
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EXACTLY.
I already did this thread. I guess credit is a way to keep shitty businesses running. |
Because actual cash flows occur constantly for all businesses.
Look at farmers, they don’t actually sell their crops until a particular time, but they need credit during the rest of the year to operate.
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Because actual cash flows occur constantly for all businesses.
Look at farmers, they don’t actually sell their crops until a particular time, but they need credit during the rest of the year to operate. |
take out loan to start business
use line of credit to do jobs and make money
when the profits come in, retain a portion of them
over time, you can build up a fund that is equal in size the the amount of the credit line (and pay off the loans)
now your business saves money because it is no longer paying interest and may in fact be able to get interest on this money
this seems much smarter to me because by keeping some of the profits you aren’t dependent on the bank and you aren’t giving them interest on money you borrow
taking out a loan is obviously NOT the only way to deal with cash flow in a business
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take out loan to start business
use line of credit to do jobs and make money when the profits come in, retain a portion of them over time, you can build up a fund that is equal in size the the amount of the credit line (and pay off the loans) now your business saves money because it is no longer paying interest and may in fact be able to get interest on this money this seems much smarter to me because by keeping some of the profits you aren’t dependent on the bank and you aren’t giving them interest on money you borrow |
Minor issues. Use retained earnngs to partially finance equipment, use retained earnings to finance receivables, use retained earnings to cover payroll, use retained earnings to market…man, it’s nice some companies have so much in the way of retained earnings.
Businesses do not run on retained earnings. If they did, growth would be infinitely slower. I suppose you could try and make a case about companies trying to go with no risk, but the other side of that is that they never get to retool and make themselves more efficient and modern.
What kind of profits do you think most businesses have?
Considering the obselescence built in to most items, and the speed of changing technology, there is no way for an expanding business to self finance, unless there was a disproportionate amount of initial cash put in. That is atypical of small and medium business. And pretty much impossible for large business.
Make money. Keep some of it.
Seems pretty simple to me.
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Make money. Keep some of it.
Seems pretty simple to me. |
Yes, it always appears simple.
Mover is correct.
Not to mention state payrolls for teaching and government.
Look at California right now, they need a $7bil loan from the federal gov’t to keep the state gov’t running.
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Mover is correct.
Not to mention state payrolls for teaching and government. |
and the federal government borrows 2 billion a day what is your point exactly?
Why are you trying to compare apples (companies) to oranges (governments)?
lots of them…this country lives on the credit system
which, as it turns out, wasn’t a very good idea after all
Good job at understanding business.
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Make money. Keep some of it.
Seems pretty simple to me. |
you already made this thread before and failed terribly at it. No wonder you stopped replying to it.
Businesses that don’t make enough money to pay their employees are pretty fail if you ask me.
Maybe if their workers would stop surfing OT all day and actually produce something this would change.
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Businesses that don’t make enough money to pay their employees are pretty fail if you ask me.
Maybe if their workers would stop surfing OT all day and actually produce something this would change. |
Well its not just that. Alot of times business are waiting to be paid by thier customers, so they take loans out in the meantime to pay thier help. I know i the construction industry, its a big part of the game
and eventually when they are paid they will theoretically make a profit, a portion of which they can retain in a fund that will eventually be large enough to cover the amount that would be needed in credit had they not kept any profits
or is this a business that doesn’t turn a profit ?
yes……there was one time when my old company got paid like a 1,000,000 dollars from a customer ….and it was 30-60 days overdue….I don’t think we got any liquidated damages either
the other problem is, its not like every transaction is a winner. when you agree to do work at a price, and the cost increases, you are going to lose some money.
if you are smart, you keep money stashed away in the good-times for the bad times. But you have to wonder if its better served to take that money and invest it vs keeping it stashed away somewhere safe.
there-in lies the problem methinks.
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yes……there was one time when my old company got paid like a 1,000,000 dollars from a customer ….and it was 30-60 days overdue….I don’t think we got any liquidated damages either
the other problem is, its not like every transaction is a winner. when you agree to do work at a price, and the cost increases, you are going to lose some money. if you are smart, you keep money stashed away in the good-times for the bad times. But you have to wonder if its better served to take that money and invest it vs keeping it stashed away somewhere safe. there-in lies the problem methinks. |
yeah but what % are you paying back to the bank on the loan?
you would need to get a greater return on the investment than you are paying in interest to come out ahead
methinks many of these revolving lines of credit are at a fairly high rate
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and eventually when they are paid they will theoretically make a profit, a portion of which they can retain in a fund that will eventually be large enough to cover the amount that would be needed in credit had they not kept any profits
or is this a business that doesn’t turn a profit ? |
you would be surprised. Its not easy figuring out money made vs money lost in construction at least.
lets face it. most of the people involved aren’t the most sophisticated bunch. they make mistakes on their time sheets. but give them an excavator and some off-road trucks….
most all medical practices run on revolving credit.
Insurance companies have up to one year to pay you for a service. So, just because you do business and bill correctly you can still have huge accounts receivable and no money in the bank.
You still have to make payroll/pay malpractice/make business payments/overhead/stock/phone etc etc etc
Generally they are pretty low actually. They are usually backed by something fairly solid, like < 60 day receivables.
Without making it overly long winded, when a company shows a profit, it has no real specific relevance to cash in the bank. And it most assuredly doesn’t represent cash in the bank at a specific time. I used to own a company that did about 4 million in revenue, and would do about 55% of it’s business in about 4 months. It would turn a book profit of about 300k. The problem is that receivables would jump up to about 900k in that time frame. At other times, there was cash in the bank.
It would make no financial sense to capitalize that company to the tune of 900k plus payables and payroll for the small time frame, then have vast sums of cash sitting in a current account at other times. The credit you are talking about is not high risk. It’s just typical cash flow for normal daily business expenses. And I haven’t factored in expansion and reinvestment.
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Businesses that don’t make enough money to pay their employees are pretty fail if you ask me.
Maybe if their workers would stop surfing OT all day and actually produce something this would change. |
our customers would take 90 + days to pay the bills. Can’t do that with payroll.
If by companies you mean AIG and if by payroll you mean spa treatments and parties for employees, then you are correct.
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Generally they are pretty low actually. They are usually backed by something fairly solid, like < 60 day receivables.
Without making it overly long winded, when a company shows a profit, it has no real specific relevance to cash in the bank. And it most assuredly doesn’t represent cash in the bank at a specific time. I used to own a company that did about 4 million in revenue, and would do about 55% of it’s business in about 4 months. It would turn a book profit of about 300k. The problem is that receivables would jump up to about 900k in that time frame. At other times, there was cash in the bank. It would make no financial sense to capitalize that company to the tune of 900k plus payables and payroll for the small time frame, then have vast sums of cash sitting in a current account at other times. The credit you are talking about is not high risk. It’s just typical cash flow for normal daily business expenses. And I haven’t factored in expansion and reinvestment. |
not many here understand anything you said.
they think all businesses run on a cash base accounting
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