Quote:
Originally Posted by pornguy
how a company can have profits in the BILLIONS and have a cash flow issue or the need to take a loan. If they have no cash flow, and they have to take a loan, then they have no profits.
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Easy. Say a company has a profit of $1 billion on $100 billion in sales. Let's further say this company wishes to open up in a large new market. Let's say China. being a large new market this expansion has large capital expenditures. Let's say $2.1 billion in equipment.
Now you know why companies like BUD, CAT and so on have credit lines and loans outstanding. They have expanding businesses with large capital expenditures and large inventory needs.
And in a year like this? You sure as hell know companies are going to need credit in a year where revenue is shrinking.