Dollars/receivables in and dollars/deliverables out is just a question of rate, unless I'm missing something.

If a 10 billion dollar company has a per-second dollar out/in rate of $1,000,000 due to actual organic business, a company with $2,000,000 can set up an LLC it buys and sells from, and legally 'swap' $1,000,000 a second back and forth in services "bought and sold" to mimic the appearance of the $10B company, to generate business interest/confidence/investment.

That's an extreme example, but the point is that real-time money flow has nothing to do with the actual 'health' of a company.

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PowerElectronix 3 hours ago | parent | next [-]

Extreme? Almost every AI related stock is investing in companies that then buy their product, efectively just giving stuff for free in exchange for better quarterly numbers.

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kakacik 2 hours ago | parent [-]

And thus we keep talking about AI bubble and when it bursts, not if it bursts

	▲	mschuster91 an hour ago \| parent [-]
		... and how much of the stonk market and the actually legitimate economy it will take down with it. My personal opinion? The bubble burst will make 2007ff look harmless in comparison.

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fc417fc802 6 hours ago | parent | prev | next [-]

I'm fairly certain you're describing fraud.

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ang_cire 4 hours ago | parent | next [-]

It's not actually fraud if there is some ostensible service they're performing. Business units within businesses 'pay' each other for 'services' all the time. Ditto for subsidiaries. Whether something is fraud might come down to intent alone.

The line between legal and illegal business transactions can be murky as hell.

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fc417fc802 3 hours ago | parent [-]

For it to not be fraud you'd have to actually exchange services proportional to the line items. That isn't what was described. Falsifying line items to juice your numbers is fraud plain and simple.

	▲	kortilla an hour ago \| parent \| next [-]
		No, there is no proportionality aspect to the law. Once you’re in the support and software subscription realm, quite vast amount of “value” can be charged for with nothing being done.
	▲	kakacik 2 hours ago \| parent \| prev \| next [-]
		Yet we see it happening all the time with various AI deals.
	▲	fatata123 44 minutes ago \| parent \| prev [-]
		[dead]

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wbl 5 hours ago | parent | prev | next [-]

That's what all these accounting rules exist to stop. No, you can't pretend that equipment breaking doesn't happen. No, you need to account for fixing the roof etc.

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jongjong 5 hours ago | parent | prev [-]

I'm fairly certain he's describing the economy.

There are so many companies like this which are just moving money around rapidly in and out with little to no actual profit. Finance sector is easily gamed.

For example, anyone can become a billionaire; just start a company, issue 1 billion shares at slightly above $1 each, keep most of them for yourself; release just 10K shares to the market and then let traders trade those same shares back and forth among themselves at high frequency... With just over $10k each, they can keep moving 10k shares back and forth 10k times per day... They call it "High frequency trading."

There you have it; now you have a billion dollar company with a healthy trade volume of $100 million per day... Your stock is in-demand! And you just needed to find two traders with just $10k in the bank and a trading platform with low fees... Becoming a billionaire is not that difficult.

You can apply the same principle to revenue... Just increase the velocity of money in and out of your company and you can hit any financial target you want.

Doesn't mean it's a solid scheme but everyone likes the numbers they're seeing. Nobody is paying attention to actual buying power.

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oleganza an hour ago | parent | prev [-]

Correct. These kind of metrics invite fraud exactly because they are not rooted in reality. "Money circulation" is a bad metaphor. https://oleganza.com/all/money-does-not-circulate/