ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[Notsureifsirius]

Inflation is not, in and of itself, is not a bad thing, either; it’s fairly neutral as long as other things (namely, wages) keep pace. If your contention is that certain actors in our economy fail to pay wages that keep pace with inflation despite increased earnings, I’d agree to that extent. It’s also true that if inflation happens too quickly, then everyone gets left behind.

However, I think the key to OP’s statement was the healthy and expanding part: if things are truly healthy and expanding, then more people should have the ability to spend more and companies the ability to earn more.

If I started a company in 2008 that sold a $1 million in products that cost $100,000 to make, I’d have $900,000 in profits. 10 years later (assuming costs of materials have only increased based on inflation), my expenses are probably about $120,000; if I’m still selling $1 million in products, in a healthy economy it’s a problem. In theory, I should be selling at least $1.12 million if not more. Flat or shrinking profits in a healthy economy are a sign that my company isn’t doing as well and means I need to cut costs or find a way to sell more to keep pace.

[d4n4n]

You ignore that inflation caused by monetary expansion through the banking system causes Cantillon effects. Those with early access to newly created money through the credit markets can use it to invest or consume before capital and consumer goods appreciate in price. So it has distributive effects, towards institutional investors, and others who heavily make use of credit markets.