Question: If a company’s annual revenue equal 9.02Billion, and it suffers revenue declines averaging 5% per year...how many years until it hits zero ??
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Taking a portion of a remainder never gets to zero. It's basic math.
Gee whiz, I Didn’t realize how many purists are out there.
After 10 years at 5% annual, revenue is down to $5B. Nothing shabby about that, except this is a publicly held company. Earnings per share are going to drop like a heavy rock once staff expenses have reached bottom, and that doesn’t sit well with investors. Additionally a flat 5% is unlikely, as offshoring and bad decisions will ultimately show up in accelerated revenue loss.
Never zero, but that’s not really the point of the question.
so, Let's we want to see we have now 9B and we want to see when we reach 0.1B. You said each current year the drop is 5%.
For instance the first year is 9B-5%9B=(1-0.05)9B=0.95*9B.
The second year you make 0.959B (from the first year) minus your 5% drop. That is (0.959B)(1-5%)=(0.959B)*(0.95)=(0.95^2) * 9B.
You can think the number of years as x and then that mean you will be making (0.95)^x * 9B.
To find when you bankrupt is: 0.1 = 0.95^x * 9 => 0.95^x = 0.1/9 => (take natural logarithm) x*ln(0.95) = ln(0.1/9) => x=ln(0.1/9)/ln(0.95) => x=87.72 years
Roughly 400 or 450 years?
But I guess in this hypothetical situation there are no expenses to cover? No employees? No dividend and pension payments to make?
If you only look at revenue, then sure it'll take a long time.
Never.
Mathematically never. You can reduce by 5 percent forever and never hit 0
If you reduce expenses such as salaries at 10% every year, it can take awhile