The term "trading dollars" is used to refer to an undesirable investment outcome that results in investing the same amount of money in a financial initiative as it earns as a return on that investment. This means that the company might be breaking even on some new product or facility that cost a great deal to begin. As a result, it is said to be trading dollars since it is not actually reaping any profits or suffering any losses. While there might be some tangential factors involved whereby a company might not mind simply breaking even on a project, a number of initiatives of this nature can become problematic due to inflationary factors.
Companies and businesses must always be very careful when proceeding with some new project that their investment will be returned to them. In a best-case scenario, the project will bring in much more money than it cost. On some occasions, projects may be ill-advised and end up costing far more than they actually bring in to the business. When a project returns approximately as much money to a company as it costs, it is known in the business world as trading dollars.
As an example of trading dollars, imagine that a company spends $500,000 US Dollars (USD) on a temporary facility to sell their products for a specific promotion. At the end of the promotion, the facility returns to the company approximately $500,000 USD on sales of the company's products. There is practically no difference between the related costs and revenues.
Of course, trading dollars is not the worst thing that can happen to a business on a specific project. Not all initiatives can have positive impact on the bottom line, and many can actually fall far below the standard of breaking even. A project that allows a company to trade dollars can at least buy some time for the company until they can begin something new. In addition, a project that can engender some sore of intangible benefits, like goodwill among customers or positive environmental impact, can be helpful in the long run even if there is no immediate financial benefit.
The main concern with trading dollars is that breaking even on a project isn't really breaking even. Due to inflationary factors that affect most economies, money loses value over time. As a result, a company that comes away from a project with the same amount of money with which it began is actually losing a bit of value. Many projects of this type can eventually lead to adverse circumstances for a business.
