When you buy a product from a large company/corporation where exactly does the money go?


For example if I bought an iPhone from apple, where does that money go? Does apple have a huge bank account of all their money?

In: 1

Yes, Apple has an enormous bank account. Or, rather, they have dozens or hundreds of bank accounts all over the world. You can buy from Apple directly (it goes to their bank account), or you can buy an Apple product from some other store, in which case it goes to *that store’s bank account*. They bought the products from Apple earlier and that money went into Apple’s bank account.

Apple then uses the money to pay their employees, make new stuff, etc etc etc.

Yes, Apple has bank accounts.

What happens to the money after it lands in Apple’s accounts? Some of it goes to expenses like salaries, manufacturing costs, interest on loans, taxes, etc.

The rest is profit, and profit goes towards the shareholders (including you, if you’ve bought AAPL). This could be in the form of dividends (they just pay each share holder $X per share they own), share buybacks (they buy shares from shareholders, driving up the value of each share) or reinvestment into the company (perhaps opening a new factory or buying another company that will allow them to make more money in the future). This is why it’s good to own shares of profitable companies.

Incidentally, this is the key difference between owning shares of profitable companies and owning cryptocurrencies. Cryptocurrencies do not have a profit generating mechanism but they do have expenses (mining, development costs, advertising costs, etc.) and so are a negative sum game: the amount of money the average investor makes is guaranteed to be negative.