Businesses going bust because of no cash flow, no sales. Where did boom profits go?

[dockingtrade]

Just wondering about businesses relying on overdrafts and going to the wall because of no demand or no cash flow.

Where are all the profits from years in business. Where's their boom profits gone already??

 

[DerKaiser]

Maybe they re-invested back into the business to expand and create more employment?

 

[mf1]

My anecdotal information would be that many businesses have been surviving on reserves for the last two years or so. At some stage, and on that basis, the business becomes no longer viable.

mf

 

[dockingtrade]

point taken on both. I was just wondering how they have no cash after 2 years im talking about long established businesses. Being cynical hasthis happened: a loss making biz with large cash reserves pay out a huge dividend (distribute the reserves)and then is totally reliant on the overdraft, so then while running at a loss it closes.

 

[Protocol]

Aer Arann

2010 - 2009 - 2008 = losses of 18m

But it did make operating profits of about 7m in 2004, before it became an unlimited company.

2007 profits = 4.5m

 

[ramble]

A lot of regular business' invested their surplus cash in property and expensive fit-outs, so when the down-turn came not only did they have very little cash, they also had huge mortgages. Business people, like everyone else thought it would go on forever and invested in what they saw as the future of their business. Arnotts is a great example of this, but it has been happening to small retailers, restaurants, firms of solicitors, architects, even doctors.

 

[Odea]

The mad rush by pubs to turn their premises in to whatever the latest interiors trend was. Yet it's the traditional untouched pub that the visitor wants. Yet you can't have a restaurant serving from old kitchens. Some businesses have to modernise by law.

 

[ajapale]

Hi Dockingtrade,

Ive expanded your title to reflect more fully your first post. Let me know if this is ok.

I think your question is very interesting and may even be a rare candidate for promotion out of the depths!

aj

 

[dockingtrade]

Hi Dockingtrade,

Ive expanded your title to reflect more fully your first post. Let me know if this is ok.

sounds good.

 

[Sue Ellen]

I think your question is very interesting and may even be a rare candidate for promotion out of the depths!

aj

Hi AJ,

I don't understand why its in STB in the first place?

 

[ajapale]

That is where the OP posted the question.

 

[micmclo]

Well an example is car dealerships.
A business where sales can be irregular and be concentrated in certain months or when a new piece of legislation on motor tax comes out.

Many of these spent huge sums on glass palaces, fantastic and modern showrooms.

Many are in serious trouble. May have made profits in the past but it's tied up in buildings and stock now and those repayments have to be made

 

[tiger]

I think the car dealer situation was partly due to changes in EU laws & car manufacturers:

The motor industry block exemption is a set of EU-based rules that define the legal relationship between manufacturers and dealers in terms of how they sell, distribute, service and repair new cars.
It also relates to after-market provisions such as the supply of spare parts and technical information. The industry’s block exemption was last renewed in 2005. Under block exemption, car manufacturers can protect their brand image by requiring their vehicles to be displayed in a “brand-specific” area of the showroom, and it has been many of these requests, as well as perhaps vanity on the part of some motor dealers, which has added to the financial burdens.

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