Games people play with cash flow • Hacker News Board

Re: Games people play with cash flow

#81

Post by gwright » Wed, Dec 09, 2020, 10:10 PM UTC

thaumasiotes wrote: post #53

nthj wrote: post #22

Earlier quoted context omitted.

Lodging must meet specific rules, or the fair market value of the lodging must be declared as W2 income. https://smallbusiness.chron.com/taxability-employerprovided-...

It's not so easy to establish the fair market value of something that never goes on the market.

True, but I don't think that lodging is "something that never goes on the market". In this example, the mortgage or rental payments for an equivalent property would be pretty straightforward to determine.

Re: Games people play with cash flow

#82

Post by brixon » Wed, Dec 09, 2020, 10:28 PM UTC

nickreese wrote: post #26

Most useful article I've read probably this year. After selling our last company I was surprised that the acquirer went on an even bigger spending spree just months after acquiring us. As a bootstrapper this blew my mind. This article helps shine a light on how they pulled it off. They acquired us for the free cashflow the company threw off (uncommon in our industry) and the leveraged that to further their expansion.…

The Accounting department is usually backwards facing. The Finance department is usually forwards facing.

Re: Games people play with cash flow

#83

Post by sokoloff » Wed, Dec 09, 2020, 10:48 PM UTC

aidenn0 wrote: post #51

valuearb wrote: post #15

Earlier quoted context omitted.

Or you might prefer not to tax corporations at all, only distributions to shareholders. “Profits” or “cash flow” kept in the corporation is reinvested capital. It’s creating jobs and growing businesses, even if it’s kept in an interest bearing bank account.

We need to tax capital gains as income as well then, because stock-buybacks become a tax-loophole otherwise.

Long-term capital gains and qualified dividends (most of them) are taxed the same. The closest alternative to share buybacks is declaring dividends IMO, so share buybacks are not a loophole otherwise.

Re: Games people play with cash flow

#84

Post by twic » Wed, Dec 09, 2020, 10:49 PM UTC

bigbubba wrote: post #39

kgwgk wrote: post #24

Earlier quoted context omitted.

Musk definitely understands the importance of (incoming) cash flows. Being paid upfront for functionality that may or may not be ever available is genius. Edit: /s

Genius, like selling a bridge you don't own.

See, that's illegal.

But creating cash-settled bridge derivatives and selling those, now that's perfectly fine.

Re: Games people play with cash flow

#85

Post by sokoloff » Wed, Dec 09, 2020, 10:55 PM UTC

birdsbirdsbirds wrote: post #79

aidenn0 wrote: post #50

Earlier quoted context omitted.

That's always been my conflict with the deficit the US government runs. - I believe we are approaching unsustainable levels of public debt - If a CEO were offered debt on the terms that the US Government gets, they would be fired for not taking it - If a CEO allocated funds the way the US Government does they would probably also be fired. - Using debt for growth capital is great - Using debt to get better terms from…

Where do people store their money but in government bonds? There is just a finite amount of gold and company shares and commodity available. If you want people to save money for the last part of their life, they need something to buy.

It is (unfortunately) more efficient for those of limited means to buy lifetime annuities than hold Treasuries. (Those will, in turn invest in bonds, but typically not exclusively government bonds.)

It is much more efficient for those who will leave an inheritance to invest primarily in equities (meaning they will invest relatively little, perhaps 0-30% in government/municipal bonds).

Re: Games people play with cash flow

#86

Post by SerLava » Wed, Dec 09, 2020, 10:59 PM UTC

Oh man, the conclusion doesn't even follow from the argument, and it's pretty obvious on its face.

The only correct conclusion from those axioms is:

There are advantages to not raising money.

Re: Games people play with cash flow

#87

Post by monkeydust » Wed, Dec 09, 2020, 11:11 PM UTC

Nice piece. If you have the basis of a business that can prove strong cash flow then you should definatley look at financing with debt over equity. In startup land its not really the done thing but in this long term low rate environment I suspect thst might change.

Re: Games people play with cash flow

#88

Post by k2xl » Wed, Dec 09, 2020, 11:19 PM UTC

tunesmith wrote: post #47

I think the argument he's knocking down is more flawed than he's letting on - specifically, just because the extra cash makes it easier to make bad decisions doesn't mean that those bad decisions will be made. The argument treats those as inexorable. If the argument had been passed through a truth checker and given a few more eyeballs, that flaw would have been obvious. That particular inner syllogism just doesn't in…

Yes, I found a flaw right away.

Not all problems that startups are solving are equal. If you want to build a Tesla competitor you're not going to be able to do that without raising money (unless you happen to already be a billionaire).

If you are building an app, yes the author may be right sometimes, where you can often find product market fit without the need of a large influx of cash.

Re: Games people play with cash flow

#89

Post by thaumasiotes » Wed, Dec 09, 2020, 11:37 PM UTC

gwright wrote: post #81

thaumasiotes wrote: post #53

Earlier quoted context omitted.

It's not so easy to establish the fair market value of something that never goes on the market.

True, but I don't think that lodging is "something that never goes on the market". In this example, the mortgage or rental payments for an equivalent property would be pretty straightforward to determine.

I disagree. Lodging goes on the market all the time, but its market value is highly specific. There is no equivalent property to compare the corporate housing to.

Re: Games people play with cash flow

#90

Post by orky56 » Wed, Dec 09, 2020, 11:44 PM UTC

bob33212 wrote: post #20

Great Article. A lot of people don't understand how important cash flow is. Even Elon pointed out that having factories close to customer is very important for a fast growing company like TSLA because if you grow too fast you'll be putting so many cars on boats before they are paid for that you will have no cash. I disagree with the framing of both articles somewhat. The question should be "What is limiting your grow…

"What is limiting your growth?" is a myopic view of this problem. An injection of capital provides runway at a minimum and leverage in many cases regardless of a company's situation at nearly every stage. Your suggestion of "growth" as the metric to be maximized is the main issue. If an enterprise wants to generate maximum short-term profits for the owner, establish a large market share initially, or generate maximum cash flows long-term, each presents a very different view of when and how capital can solve problems.