Why does this reduce capital, and why does this reduce the company’s ability to pay creditors?
In: 141
I borrowed money from my two brothers.
I have 10 tickets to see a movie in the far future, but my big brother wants some money back. I sell 4 tickets to a friend to pay him back.
I end up having left over money so I buy two tickets back that I previously sold.
Uh oh, now my little brother wants me to pay him back, but I spent too much money buying back tickets.
If I want more money, I’ll have to sell tickets/shares.
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