AAA company has come up with a gross revenue to the public to tell everyone about what they have made before paying taxes, interest, depreciation and amortization. The cash you earned are not FREE. Once other investors look at AAA company annual report, investors would think that this company is absolutely one of their target and it appears to be growing in leaps and bonds.
Seem like the happy time is over when the bank, bondholders and IRS just come to get their money back. Every company has to pay taxes, interest, depreciation and amortization. That is the point. Their is no place to hide. AAA company has to pay bills by sharing those from its gross revenue. If the company fails to pay those bills, they can force bankruptcy.
Here is thing actually works:
The gross revenue of $32,000 annually to pay $12,200 taxes each year, current mortgage payment of $1,300 per month, and student loan payment of $300 per month.
That is not all and you will see the big problem soon. Even the man keeps ignoring what he has to pay back but his creditors may not forget. Of course where is their money? Let's assume that all payment has been done so AAA company has only $700 to live with. That's not enough; his man just comes in as ask for $800 bill for office repairing. Depreciation just begins and soon the maturity date of bonds are about to come.
In the real business world, AAA company is absolutely a useless company who try to masked itself. Usually this action is done by a cleaver man but usually caught. Do not try to fool people since their is no place to hide and no where to run.
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