What do companies do with profits?

[Cyclone]

It's a straight forward enough question. What do you think companies do with profits?

 

It's a very open ended question. There are a number of things they can do, but they don't all do the same.

 

Reinvest in the company (R&D for example, expansion, buying other companies, retooling, etc)

Distribute to shareholders

Keep as cash reserve

Pay bonus to staff (probably way down the list except in small companies and co-operatives)

 

I think that about covers it.

 

---------- Post added 17-01-2016 at 10:07 ----------

 

Aside from the usual acidic Labourite views, Most companies prefer to reinvest profits, it is this which drives economic growth (and avoids paying taxes). Once a company gets to be rewarding for investors (shareholders), they will expect some return, either through dividends (rare) or through smart investments that grow the value of the company.

 

Dividends rare??? No, they're "normal", amongst publicly traded companies ones that don't pay dividends are the exception.

 

---------- Post added 17-01-2016 at 10:08 ----------

 

Speaking for my own Ltd. company I save most of it, as for the rest:

 

Paying my salary

Paying my taxes

Occasional capital investment (new PC, new monitor)

These come out of your gross profit and reduce your net profit.

[Isabelle]

The company I work for gives all employees a bonus each year based on a percentage on the profits and personal performance.

Also this year they have invested in refurbishments and new equipment and staff training. After that I guess the directors use the profits for their own purposes, but they are both employed here full time, and work hard so I think they have earnt it

[El Cid]

A bad employer will treat you as poorly as they can get away with.

 

A normal employer will pay you the least that they can get away with; because there are always others willing to do your job, but the change over process can be costly for the employer.

There are always others willing to lead the company, but the same rules dont always apply.

[carosio]

Waste it

 

When it should be going back

 

To communities

 

But if the company makes a big loss...........well there's always community spirit!

[Eric Arthur]

But if the company makes a big loss...........well there's always community spirit!

 

The staff could chuck in their houses to cover the losses.

[unbeliever]

Yes, there's always talk about who should take the profit, but what if there's a loss. The government rarely intervenes to take their share of the loss, but they're happy to take their share of the profits.

On the rare occasions (financial crisis) that they realise that they've become so dependent on a business that they actually do have to take their share of the loss, the first thing they do is change the law so that it can't be that way next time.

Now you have people whinging on that the profits should be shared out better, but no discussion at all of the losses being shared out.

 

Let me ask those who are whinging on about profits:

Will you agree to help cover the losses when things don't go well? No? Then with all due respect, shut up. You're already getting a cut of the profits as it contributes to funding public services. Say thank you and go on your way.

 

Honestly, the number of people who are mindlessly driven to bite the hand that feeds them is depressing sometimes.

[RonJeremy]

Yes, there's always talk about who should take the profit, but what if there's a loss. The government rarely intervenes to take their share of the loss, but they're happy to take their share of the profits.

On the rare occasions (financial crisis) that they realise that they've become so dependent on a business that they actually do have to take their share of the loss, the first thing they do is change the law so that it can't be that way next time.

Now you have people whinging on that the profits should be shared out better, but no discussion at all of the losses being shared out.

 

Let me ask those who are whinging on about profits:

Will you agree to help cover the losses when things don't go well? No? Then with all due respect, shut up. You're already getting a cut of the profits as it contributes to funding public services. Say thank you and go on your way.

 

Honestly, the number of people who are mindlessly driven to bite the hand that feeds them is depressing sometimes.

 

*In Monty Burns voice* "Eeexxceellleenttt"

[Cyclone]

Yes, there's always talk about who should take the profit, but what if there's a loss. The government rarely intervenes to take their share of the loss, but they're happy to take their share of the profits.

 

To be fair, losses can be used to reduce the tax bill on future profits, ie carried forwards. So whilst the government generally doesn't (and shouldn't) bail out loss making companies, it does lose future tax revenue to those losses if the company recovers.

[unbeliever]

To be fair, losses can be used to reduce the tax bill on future profits, ie carried forwards. So whilst the government generally doesn't (and shouldn't) bail out loss making companies, it does lose future tax revenue to those losses if the company recovers.

 

If it recovers...

[Cyclone]

Yes, that's why I used the word if :-)