How can a company post a large loss...

[DurocShark]

Ford posted a $284,000,000 (yes, that's 284 MILLION) loss for the 3rd quarter of this year.

This is something that's always bugged me. Who pulls that $$ out of their pocket? How does this all work?

 

[Conky]

Cash reserves.

 

[MikeMike]

GM has something like 22 BILLION in liquid assets or something like that.

and Ford was nothing compared to GM.

GM lost $1,300,000,000 (yes, thats 1.3 BILLION) for the third quarter.

 

[Cawchy87]

Losses are greater than Average Fixed Cost? First year economics.

 

[DurocShark]

So do they actually sell off assets? Or just say they have 'em so it's ok?

 

[shilala]

Originally posted by: DurocShark
So do they actually sell off assets? Or just say they have 'em so it's ok?

They borrow against them, thus increasing their indebtedness and potential for further loss making a turnaround that much more difficult.

 

[DurocShark]

Ok. So they don't just say "we lost money", they actually have to make it up somehow. That's better.

I read all the time about these losses, but never knew what was done about them.

 

[Zugzwang152]

also the reason why when they do liquidate and go out of business, some investors always gets screwed, because by then, they've borrowed more money than their assets can cover.

 

[z0mb13]

because they are still very liquid

 

[GuitarDaddy]

Companies have many ways to finance themselves as long as they own assets. And reported financial losses include "non-cash" expenses like depreciation of assets already paid for, amortization of patents, bad debt exp, ect... ect... . Thats why cashflow is much different from profit/loss

Large companies with billions in assets can sustain themselves through several years of large P&L losses, but it can and will have a devastating effect on the company if they can't turn it around. It's really sad how far companies can fall, I worked 6mos for a company as a turnaround consultant that had 17 straight years of financial losses, banks and various "loan shark" type commercial lenders owned all of their assets, making payroll every pay period involved convincing one of your lenders to increase the companies indebtedness. In the end the owners disappeared and the bank took over the building, the employees came to work one morning and the doors where padlocked.