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I work for a company that does something that I guess is a bit unusual - they use the revenue from our customers to pay employee salaries. If you would have ask

I work for a company that does something that I guess is a bit unusual - they use the revenue from our customers to pay employee salaries. If you would have asked me, this would seem like the obvious way to do things, but I'm told that debt is very important for some reason or other. As Homer Simpson has been known to say, "I don't know how the economy works".

tnel77 3y ago
You would think that this would be an acceptable approach, but MBAs have decided that this is not the case so I don’t know.
- H8crilA 3y ago
  Except all tech giants do just that, yet they fire people. Google has an amount of cash in the bank comparable to all the help that has been sent to Ukraine (though there are also many things that Ukraine gets that are not really measurable in money). Sent, not "promised" or whatever else some states do to make themselves look better.
glitchcrab 3y ago
How very dare you suggest that organic growth is the way forward? Everyone here knows that unless you've hit your series c and are soaring for unicorn status then you might as well just not exist at all.
rgrieselhuber 3y ago
When interest rates are very low, companies are incentivized to borrow more as they can get better returns by investing their own cash flow into assets with predictable returns. When those interest rates go higher and these higher interest rates are coupled with harsher terms, then the ability to invest decreases, companies view reducing headcount as the way to survive to the next phase.
abtinf 3y ago
Congress has decided this is unacceptable for engineering salaries.
huijzer 3y ago
It's about percentages. If the CFO expects that the company can earn 10% on any capital, and they can borrow at 1%, then they will do that. In effect, this means that they will make 9% for free. Even more so, the CFO's bonus probably depends on the net income, so it's a great deal. It's all fun and games until the tide goes out. Then you suddenly might need to rollover the debt at new rates like 6% while the company earnings also go down because everyone can spend a bit less. Suddenly, you might lose a few procent (or more!) on the loans. It's a bit of a double whammy.
- Repulsion9513 3y ago
  IOW (as I've said before and been throughly downvoted for before): short-term profit comes before long-term sustainability.
deleted 3y ago
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paulddraper 3y ago
> I'm told that debt is very important for some reason or other I can help you out here :) In addition to revenue, debt is a source of funding for investment into growth. For example, if you can get a return of 8% on an investment, it make sense to borrow capital at a 5% rate. But not at a 10% rate.

tnel77 3y ago

You would think that this would be an acceptable approach, but MBAs have decided that this is not the case so I don’t know.

H8crilA 3y ago
Except all tech giants do just that, yet they fire people. Google has an amount of cash in the bank comparable to all the help that has been sent to Ukraine (though there are also many things that Ukraine gets that are not really measurable in money). Sent, not "promised" or whatever else some states do to make themselves look better.

glitchcrab 3y ago

How very dare you suggest that organic growth is the way forward? Everyone here knows that unless you've hit your series c and are soaring for unicorn status then you might as well just not exist at all.

rgrieselhuber 3y ago

When interest rates are very low, companies are incentivized to borrow more as they can get better returns by investing their own cash flow into assets with predictable returns. When those interest rates go higher and these higher interest rates are coupled with harsher terms, then the ability to invest decreases, companies view reducing headcount as the way to survive to the next phase.

abtinf 3y ago

Congress has decided this is unacceptable for engineering salaries.

huijzer 3y ago

It's about percentages. If the CFO expects that the company can earn 10% on any capital, and they can borrow at 1%, then they will do that. In effect, this means that they will make 9% for free. Even more so, the CFO's bonus probably depends on the net income, so it's a great deal. It's all fun and games until the tide goes out. Then you suddenly might need to rollover the debt at new rates like 6% while the company earnings also go down because everyone can spend a bit less. Suddenly, you might lose a few procent (or more!) on the loans. It's a bit of a double whammy.

Repulsion9513 3y ago
IOW (as I've said before and been throughly downvoted for before): short-term profit comes before long-term sustainability.

deleted 3y ago

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paulddraper 3y ago

> I'm told that debt is very important for some reason or other I can help you out here :) In addition to revenue, debt is a source of funding for investment into growth. For example, if you can get a return of 8% on an investment, it make sense to borrow capital at a 5% rate. But not at a 10% rate.