Take this to the logic absurdity, you have a car you previously sold for $2 for $1 COGS. Tomorrow COGS is $1M for the car. Could you sell it for $1M+1? No you would lose your ass because your line of credit and investments would not be able to be supported by the returns, in fact if this is your only option you would probably stop making cars altogether and invest in another business and sell your assembly line, eventually enough car companies would go out of business until the supply curve met a high enough % profit to normalize with performance of other businesses.
Now this analogy has a LOT of problems but the point is it directly affects investors, even if the interpolations inbetween are imperfect.
So basically the money a business uses to produce the next tranche of goods (so to speak) normally comes not from income from sales of the last tranche, but rather from external funding sources such as loans or capital injection from investors?
Is that really so common as to be universal and affect investor behavior like you suggest? Like for certain types of business, and especially for early stage businesses, I do expect this to be the case. But does it apply to the market broadly? Scary if so, since it seems like a destabilizing force.
It's going to vary business to business, but if you have to spend money now to make money later, there's always going to be some preference to make sure that if the % return later is too small the money gets reallocated to something that can offer better returns.
Whereas a business that can figure out how to be paid significantly before it delivers can run on much slimmer margins.
It tends to affect larger companies even more because their cash flow is heavily buffered by lines of credit on both sides, their vendors and clients. Their customers might pay them on net 30 or even net 90 but many costs - like salaries for the people to service those contracts - need to be paid on shorter time horizons.
Now this analogy has a LOT of problems but the point is it directly affects investors, even if the interpolations inbetween are imperfect.