Many companies claim to earn millions of dollars a year. Why were they heavily in debt when they failed?

This question is simple. Although the company claims to make millions of profits every year, these millions of profits cannot be directly used and need to be put into production and operation. Only when the company's funds are constantly flowing can it be said that it is profitable.

Because for most companies, it is basically bank loans. Before bankruptcy, the bank loan won't let you pay back all, only pay a small amount of interest. And some payments actually only paid part of the deposit, not all of them.

However, once the company goes bankrupt and the capital chain is broken, first of all, the bank will demand full repayment of the arrears, all suppliers will demand payment for all the goods, and all employees' wages and compensation will also need to be paid, not to mention the huge deficit when reinvesting the previous profits in the process of capital operation, so it is not surprising that they find themselves heavily in debt when they finally close down. In addition, there are cases such as uncollectible payment and bad debts.

Even banks, if all depositors suddenly demand to withdraw their money, then even banks may not be able to withdraw it at once and go bankrupt. What's more, it's just a company?

If you have run a company, you will know that the company's funds mainly rely on circulation and keep circulating. As long as the circulation process is very smooth and there are no major problems, it doesn't matter even if you owe a lot of debts, because many people, including banks, are willing to invest in your company and will be happy to lend you money.

Many bosses seem to have money, but in daily life, they spend money more freely than ordinary employees. However, it is sometimes difficult for you to get your boss to spend millions for your own use at once. Don't be confused by the plot of TV series. If the boss wants to turn the profitable money in the company account into private use, he has to pay a large amount of personal income tax. Therefore, many bosses will choose to pay themselves as employees and keep profits for themselves, because in this way, the tax to be paid will be much less than before. The rest is used to buy raw materials, machinery, build factories, etc. Expand or put into production. The so-called profit of 1 million is only a temporary data on the financial books.

That's why even if it claims to be $1 million, when it finally goes bankrupt, it is still the real reason for being heavily in debt.