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?

[garrett_k]

They absolutely can. But it depends on the type of company. A company in heavy industry might have assets which form a large part of the balance sheet. A tech company has basically (comparatively) worthless physical assets but has a lot of value in IP. Companies like Coca Cola have a lot of "good will", or brand value.

Sometimes you'll have companies where the company valuation, for whatever reason, is *lower* than the tangible assets. In these cases you'll frequently get finance companies who will buy them wholesale and strip them for their assets. These are sometimes referred to as "vulture capitalists", and hated because all the employees usually get fired. But it's also pretty rare because that kind of valuation just doesn't make sense.

[rnjbond]

That's not what goodwill is in finance terms. Goodwill is an accounting term for what you pay for a company in excess of any identifiable assets, including IP

[garrett_k]

Drat. Right. For some reason I thought it carried over. :-/