Talk:Income/Archives/2015

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Bad thinking: If you search for "earnings", you'll be redirected to this page. But there is no definition or discussion here of the term earnings. This would be helpful, since I understand that the term has different definitions in different English-speaking countries.

Anders Lotsson — Preceding unsigned comment added by Lotsson (talk • contribs) 08:38, 15 April 2011 (UTC)

Removed

I removed this paragraph:

In corporations, income is not exactly synonymous with the way most people think of profit. In the minds of most people, if a person selling lemonade that costs him 3 dollars and which he sells for 5 dollars, he makes a profit of 2 dollars which he keeps himself. Lets say that he decided to make his business a corporation and sell all of it, but became CEO. The next year he sells 5 dollars worth of lemonade, his salary (what he gets paid by the company) is one dollar, and the cost per lemonade is still 3 dollars. Now the income is the 1 dollar left over. Critics of the concept of a corporation says that in practise they must still pay the guy 2 dollars, the same as he would make if he fully owned the company, otherwise he would leave. This would force the company to raise costs or introduce other means to keep his pay the same, and critics argue that this is a fatal flaw in the concept of a publicly traded corporation.

This long story is unnecessary; distilled, I think it is saying CEOs think they own the company, and should be compensated accordingly. I don't actually know any critics who make this rather naive argument at all. Tempshill 01:27, 14 Feb 2004 (UTC)

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No this is not the point Im trying to make at all. Rather, it is trying to show the disconnect between what people normally think of as "profit" and what is known as income. The main issue is with the economic efficiency of a corperation. Lets take for example that a corperation buys out a local run bakery. Whereas the profit was essentially the "pay" for the guy who owned it, now the guy who runs it is probably going to be getting that amount of pay anyway, and the shareholders are going to be getting their cut. In order for them to get anything, either the price has to go up, or they have to be doing something more efficient. This paragraph is just trying to put the system into perspective, most people colliqually have a very wrong understanding of companies, corperations, publically traded corperations, etc.

If I understand you correctly, you seem to be saying that a corporation has more overhead to pay, in the form of shareholders, CEO, etc. than a sole proprietorship and also that these corporate expenses disguise reported income relative to the income of a sole propriator. Both of your claims could be true under certain circumstances, but I don't think we can make them as general claims. What we are seeing is a division of labour. A sole proprietor if performing the dual function of managing the enterprise and contributing investment money. In a corporation the CEO does the management while shareholders invest most of the money. In your example above, the $2 earned by the sole proprietor should be seen as $1 for his management activities and $1 for his financial investment that makes the business possible. mydogategodshat 10:24, 18 Feb 2004 (UTC)