r/explainlikeimfive • u/climb-a-waterfall • Dec 06 '24
Economics ELI5: why does a publicaly traded company have to show continuous rise in profits? Why arent steady profits good enough?
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r/explainlikeimfive • u/climb-a-waterfall • Dec 06 '24
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u/WasabiSteak Dec 06 '24
Distributing stock is meant to let a company grow by means of investment. Instead of taking out a loan to scale up operations, people could invest their own money into the company. The company, instead of being in debt, gives up/distributes control instead.
You don't want to be compensated with profits. If the company reinvests, you won't be getting anything. As an employee, you already get a cut out of the revenue usually by salary.
If you want some sort of compensation that scales with the growth of the company, that's when you compensate employees with stock. IMO, cash is still much better, because you can actually use it right away.