Submitted by angrybird7677 t3_zzswm0 in explainlikeimfive
primalmaximus t1_j2evpzz wrote
Reply to comment by sass-pancake in ELI5: Why do companies require annual budget be spent 100%? by angrybird7677
There's also taxes. Companies get tax cuts if their net revenue is below a certain point.
Basically, if a company makes a gross revenue of $1 million, but their operation costs were $750 thousand, then they get taxed on the $250 thousand that was their net revenue.
A lot of companies, such as Netflix when they started out, will take advantage of this system. They will purposely spend money to recklessly grow their catalogue, causing them to be in the red by the time taxes are due. Which gives them tax breaks that don't reflect the reality of how they are purposely gaming the system.
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