Good Companies Should Not Last Forever. | How Money Works

Good Companies Should Not Last Forever.

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A going concern is a business term used by accountants to describe a business that has the resources to continue making enough money to stay afloat for the foreseeable future.

This assumption is useful for accounting practices, but it could be overrated in the field of investing.

We tend to think that successful companies will be around for a really long time and certainly some companies like this do exist, Johnson and Johnson, General Electric and Coca Cola have all been in business for over 100 years trading as the same company they are today.

Even older companies exist if you follow the history of business mergers back to their beginning, JP Morgan Chase is the modern product of several bank mergers over three different centuries with the first constituent bank tracing it’s roots back to 1799.

Having early investments in any of these companies would make you a very rich person today, but you would also be a very dead person too, which reduces the appeal of this investing strategy considerably.

A recent industry report has found that one of the biggest mistakes that investors make is overvaluing the longevity of a company and its easy to see why with people like warren buffet talking frequently about how much $5 invested into coca cola would be worth today.

So it’s time to learn How Money Works to find out why businesses that last hundreds of years are not always the amazing investment they seem.

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#business #investing #finance

Edited By: Andrew Gonzales

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