When revenues exceed expenses, you’re profitable. Sounds simple enough, but as any business owner knows, the rapid pace of technological and market change in a dynamic global economy means that what worked last year—or last month—may not rake in the earnings now.
Unprofitable firms can get caught in a macro version of what economists call a vicious circle: Lenders and investors shy away. Talented employees leave for greener pastures. Stock value diminishes, officer bonuses are cut, vendors aren’t paid according to terms. With limited resources, companies can’t pursue ambitious new business READ TIME: 7 MINUTES opportunities or make investments to sustain growth. For companies without outside funding, no profit means no capital.