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Can a company be sustainable without making profits?

The first and natural answer could be a "No" but let's try to go further the first idea.

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Question ajoutée par Utilisateur supprimé
Date de publication: 2014/07/09
Shihan Anwer
par Shihan Anwer , chief executive officer , Ortus Capital (Pvt) Ltd

The answer depends on the nature of the business and the profile of the company. however, the general asnwer would be yes. a company could sustain without profits. however, it cannot without generating positive cashflows. even if a company made decent profits, if it cannot manage its cashflows, it would be in serious trouble. and speacially if it did not have enough cash to Manage its working capital, it would not be able to operate smoothly any more!

however this does not say that the company should operate forever without making profits. however it would be recommended not to go ahead with the business if the carried forward losses of the company is to exceed its net assets/equity (the sum of shareholders capital, retained earings and other equity reserves)

Divyesh Patel
par Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town

No.

With economic uncertainty continuing, there has never been a more important time to focus on good, sustainable and successful business structures, with an emphasis on long-term growth rather than short-term profits.

samir baddour
par samir baddour , Manager Corporate Finance , Baniyas Investments and Development Company

Yes it can.

 

depending on the type of the business. many business go bust even by having great profits. Real estate for example may have operational losses but with revaluation gain on its inventory or investment property they turn the bottom line into a positive profit.

however, what a business cant sustain operations with a cash deficits. without closing its funding gaps in one way or another (raising capital, equity through PP or IPO, bridge financing, bank facilities) it will simply declare bankcrapcy

Fuzail Zubaid Ahmad MBA CPA CMA
par Fuzail Zubaid Ahmad MBA CPA CMA , Vice President Finance , Nesaj Real Estate Development Company

Profits are the most vital component of business sustainability.  If a company is not making profits for many years, only speculation will drive it forward.  There have been many examples in which Dot Com companies returned losses year after year, but the companies kept selling shares to high risk seeking investors.  Many such companies eventually started making huge profits, providing handsome returns to shareholders. 

Tanujit Medhi
par Tanujit Medhi , Lead Strategic Analyst , Qatar Airways Cargo

If a company is making money sufficient enough to cover its variable cost, chances are that it will still sustain. However this is only for a short term and in the long terms the company should make sufficient income to surpass both fixed and variable cost combined and make profit.

Utilisateur supprimé
par Utilisateur supprimé

For me, as usual it depends of the company business. Commonly a company goal is to earn money so it's seems to be impossible to have a company not making profit. However, if you take for example R&D it's not unusual to see such companies withiut profit for a decade. You also have companies that are perfoming public services related offer. Their offer doesn't make profit, but as they are funded by governments to maintain their offer.The last point is more an accounting/ tax point. Some costs are just for accounting and/or tax optimisation purposes (ex: intercompany costs)

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