It's simple math....
MSLP made 19M in sales but only 1M in profits. That's only a 5% profit. In other words, it costs MSLP $18 to make a profit of $1.
So, let's say MSLP receives an order for 38M the following quarter, they would need 36M for operating costs and they have only 19M in the bank, they've got a serious capital problem. Where are they going to get the money to meet the demand? There are a number of ways: inviting capital investors to come on board (Drew would be one such example), borrowing money from banks, selling off assets, receiving advanced payments from distributors and/or issuance of shares.
Now let's say it only costs MSLP $4 for every dollar of profit, they would have made $4.75M in profits from Q1, not 1M.
And again, if if only cost MSLP $4 for every dollar of profit, then the capital needed to generate 38M in sales for Q2, they would only need 9.5M for operating costs, not 36M. And if they had 19M in the bank from Q1, they could more than easily meet the doubled demand, heck, they could have met quadrupled demand with no need to raise additional capital.
Which is why the new corporate initiative is based on CEOs bonusing themselves not on revenue/sales but on profits, net income and margin growths. It's to give them true motivation to work hard on reducing operating expenses to maximize their profits as much as possible in order to generate true net income and margin growth that would enable them to continually meet increased demands for their products without having to borrow money or issue more shares.
And once they start making a real profit, that's when they can easily afford to start retiring shares thereby increasing the value of their shareholders' holdings.
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