3 ms·
Interesting. The introductory business courses I took said revenue was far more important than profit. Is that not true?
by pyuser583 4y ago
Interesting. The introductory business courses I took said revenue was far more important than profit.
Is that not true?
- cdf 4y agoI suppose the business courses you took are tech startup oriented. For tech companies until recently, the business is valued at roughly 10x revenue, so revenue is the all important metric. Profit is not important. This is why the barely profitable Salesforce and the non profit enterprise named Uber is worth so much in the stock market. For traditional businesses, the metrics are profit and in particular profit margin (profit/revenue), so more revenue at same profit is bad. And other metrics like ROCE (Return on Capital Employed) and FCF (Free Cash Flow)... which incentivise lots of debt if you can borrow cheap but discourage capital investment. This is obviously antithesis of tech startups.
- georgeecollins 4y agoI guess the point is that you can make both cases. They would argue that a company with dominant sales and no profits could be bought by bought by a smaller competitor with profits. But they had never seen VCs like today and could never conceive companies that could go for years with no profits and maintain high stock valuation. The world changes. So there's your answer: sometimes!