Companies like Uber for example have claimed to have never made a profit, and have been in the hole this entire time they’ve been in business, burning money each year (this is just from what I’ve heard, I’m not sure if this is entirely true or not). Yet the owners and investors of the company have made a lot of money as far as I know. A few shark tank guests were early investors in Uber and they have made a good chunk of money from it but how does that happen if the company has never made a profit?
In: Economics
There’s a couple ways.
1. They convince more people that the company will *become* profitable. Those people then invest in the company so current investors could maybe sell their shares in the company for more than they paid for those shares. If that sounds like a scam… well as long as you aren’t outright lying about the company and it’s finances, products and how its *supposed* to make money that’s perfectly legal.
2. They can get “hired” by the company and paid money as part of the contract. That is effectively a wage. Profits are revenue (the actually money coming in) minus the operating costs. One of those costs is…wages. So a company could be unprofitable in part because the big wigs running it are getting paid a lot. This also sounds a bit scummy, but *ideally* they are actually doing work.
Latest Answers