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You're forgetting that there's a market at the other end too. Every business has a cost of capital, and if its returns are not in line with other similarly plac
by econ101time 4y ago
You're forgetting that there's a market at the other end too. Every business has a cost of capital, and if its returns are not in line with other similarly placed businesses, they will have to spend a lot more money to acquire capital.
- Retric 4y agoThat’s assuming they need to raise capital. However, most companies are flush with cash and will only become more profitable with increasing demand.
- econ101time 4y agoSo much wrong with this line of thinking. 1) They're also facing increased costs. 2) Most companies are by no means "flush with cash". 3) Cash is fleeting but the need for capital is always hanging over your head. Even if you pride yourself on bootstrapping your business and not needing much in loans or additional investment, one or two bad quarters can quickly leave you with no choice but to get loans or sell equity.
- Retric 4y agoBased on what evidence do you think companies aren’t flush with cash? Every indicator shows US companies have cash reserves vastly above historic levels. This isn’t about year to year changes. Start looking back to say the 1990’s and the difference is huge.