this post was submitted on 08 Sep 2023
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I don't agree with the statement at all. It fails to account for any variance in the money coming in. But, I'm not going to argue with my future brother inlaw. Not worth it.
It's like you said, he's right, until he's not. The entire company can go under if they have a few bad quarters.
That's my point, if you assume it stays sunny, buying an umbrella is a wasteful expenditure.
And in business terms, not investing a certain part of your capital means, you don't get a return on that investment (and interests are most likely much lower), so effectively you lose money.
What our economy and our CEOs often ignore is, that the universe doesn't end next quarter. Holding capital back essentially smoothes the overall profits/losses over time, that's awesome for workers, customers and stakeholders - but CEOs need line go up, so they can get a bonus. So no money is held back.
Sorry, poor wording on my part. I meant I don't agree with the statements my future brother inlaw made.