Eli5: How can large companies be worth (valued at) so much when they do not make any net profit?
In: 7
How can a college education be considered valuable when it costs a hundred thousand dollars and four years of your life? The answer is the same for both question: Because the money you’re spending now is expected to pay off more in the future.
If you had a way to get back $20 next year for every $1 you spent today, how much of your money would you be pouring into this investment? Well, that’s basically the same kind of logic that companies which are not posting profits are operating on: They’re re-investing profits into the business, so as to be able to make more money going forward.
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