this post was submitted on 15 Jan 2024
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The dictionary defines profit as "income in excess of costs" i.e. subtract all expenditures from revenue, that's profit. It gets more complicated, there's gross profit vs net profit, but money that is specifically set aside by the business for the future is an operating cost.
Dividends are just a way for profits to be distributed to shareholders.
That's my point.
You said
But the money they take for themselves are called dividends, and is a subset of profit. Profit can stay in the business too.
Well, no, dividends are specifically how the profit is divided up among shareholders.
When the money stays in the business it stays in as "retained earnings" and they become an asset of the company i.e. the money they take for themselves. I'll admit the language is actually less clear here than I thought, because retained earnings are also sometimes referred to as "undistributed profits" and I'm not actually sure if that's an accurate way to refer to them or if it's just a jurisdictional tax thing. And also because those undistributed profits can then still be reinvested they don't technically count as a business expense because those retained earnings were from a previous fiscal cycle and- it's all a mess lol
I think we have to consider that from the perspective of many shareholders, receiving dividends vs increased share price is basically the same thing. I know all my accounts are set to reinvest dividends, for example.
So if a company reinvests all its income and grows like crazy, the shareholders will profit from that growth even if you might say “profit” wasn’t distributed.
Or if the company does a share buyback, or gives out huge bonuses, or buys an "office" in a tropical location that's actually just a vacation spot that they can use for a tax shelter, etc.
Basically, I overstated my case before. There's lots of ways to use business expenses to distribute profits without actual reporting profits.
So in conclusion, death to capitalism 👍
I don't see how you can consider leaving it in the company being "taking it for themselves". You can't do anything with that money other than pay for business investment or expenses. At least until it's turned into dividends.
I reject the idea that the company is some legal person separate from the people that run it. They are the company, they can choose to use that money however they want. If they want to pay out huge bonuses from the profits, they can. It's their choice.
Just because they might choose to use that money to fuel growth or buy back stock or something doesn't mean it isn't theirs.