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Profits to Gift Cards to Revenue to Profits

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#1 kmarinas86



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Posted 06 January 2008 - 07:19 AM

Imagine a company which took half of its profits and converted them to gift cards that can only be used to by its more expensive goods and services. No other company could accept them because they came from the profits and they must go directly to future sales of the company. Part of the future sales involves the gift cards, etc, so therefore a multiplier is involved. Now if production cannot catch up with the increased aggregate demand, that is fine, since the total spending possible from initial sales to the end would be the same as if there were no tax in or on that sales at all, due to the recycling of gift cards.

#2 Buffy


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Posted 06 January 2008 - 04:45 PM

They're called "Frequent Flier Miles!"

I could spend hours on the problems these cause for the balance sheet and the tax effects both on the company and the recipients.

Its not rocket science, but its not as "simple" as you might like to think...

A wise man puts aside 10 percent of the money he gets - and 90 percent of the free advice, :eek: