‘Capital’ means ‘Principal.’ What does ‘Principal’ mean in business? The ultimate goal of any business is to create wealth. Wealth serves as the foundation for creating value, and that value must be generated solely through production. To produce, the cost must be invested first; the source of that cost is referred to as ‘Principal.’ In other words, the result of a transaction through trading is ‘revenues,’ and if costs and expenses are subtracted from sales, what remains is ‘profit.’ If costs and expenses exceed revenues, it results in a losing trade; if they are lower, it results in a profitable trade. Therefore, principal serves as the benchmark for profitability; in other words, it is referred to as capital. Whether a business is good or bad is determined by its profitability. If the principal is insufficient, borrowing capital becomes necessary, which is termed “debt.” Just as the number of principals capable of producing tankers differs from those that can create bicycles, the si...
A shareholder is the owner of a company. A shareholder is someone who invests capital in a company. There are three ways for shareholders to take money from the invested company: 1) become an executive or employee and receive wages, 2) receive dividends after settlement, or 3) receive remaining assets (liquidation property) excluding debts when the company is liquidated. A third party investing in the company is directly irrelevant to the existing shareholders in cash flow. Despite the shareholder owning the company, there is no way to share the surplus capital caused by the investments among the existing shareholders other than 1) and 2) except for company liquidation No. 3. Let me be clear: receiving an investment does not guarantee benefits for the company. It simply covers future costs and expenses in advance. Capital inducement means increasing the heavy duty of leaving profits, not being given profits unconditionally. - Joseph’s “just my thoughts”