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Old 04-04-2015, 02:33 PM
 
488 posts, read 817,235 times
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Here's a good breakdown of profit margins by sector:

http://pages.stern.nyu.edu/~adamodar...le/margin.html
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Old 04-04-2015, 02:36 PM
 
382 posts, read 626,255 times
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Quote:
Originally Posted by Larry Caldwell View Post
The typical restaurant with a good customer base prices food at 1/3 for ingredients, 1/3 for overhead, and 1/3 for profit. Fast food is closer to 50% profit.
In analyzing many small businesses for purchasers, it is not unusual for many to report such margins, but if you account for the equivalent of a paycheck for the owner (and their family - at "fair" wages), they might not be making much for their additional risk. They better be making >20% before their take, just to live.

Of course, this 33% number you provide does not account for labor, for marketing, replacement cost of equipment (which depreciation is supposed to model on a year by year allocation), etc.

Even big chains would be doing well to hit 20% consistently...
http://finance.yahoo.com/blogs/the-e...192549497.html
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Old 04-04-2015, 02:52 PM
 
382 posts, read 626,255 times
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Quote:
Originally Posted by mark85 View Post
Here's a good breakdown of profit margins by sector:

Operating and Net Margins
Great link, thanks!

Several different views of profit margins.

Only if one gets to EBITDASG&A/Sales (second last column) does one get numbers in the 30% range and up nearly across the board (EBITDASG&A = Earnings Before deducting/adjusting for Interest Paid, Taxes, Depreciation, Accruals, Sales/General/Administration Expenses). This figure is perhaps usable as a relative comparison between industries, given different economic structures, but certainly wouldn't think this is a definition the average joe would be thinking of.

The rest show there is a significant disparity between perception and actuality.
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Old 04-04-2015, 03:03 PM
 
140 posts, read 188,103 times
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Quote:
Originally Posted by Transplanted99 View Post
Why is this important?

As the article says: "The public that believes in the fantasy-world of sky-high 36% profit margins would naturally think companies are just being greedy and stingy when don’t pay higher “living wages” and have to be forced to do so through minimum wage, or living wage, legislation"
In other worlds, the article made an argument, by misusing a statistic, to further a political viewpoint. I'm shocked. The reasoning can easily be disputed for the bogus nonsense that it is:

  1. It does not address the huge disparity in the US between the CEO and management workers, versus low level workers, all of which are deducted as payroll expenses pre-net margin. i.e if that disparity was not as extreme lower level workers could be paid more without reducing net profits one cent.
  2. At a company like Walmart a single percentage point less of profit would equal $3000 more per employee annually, a significant improvement. And that is exactly what companies such as Costco have done, they've offered a much better living wage to workers at the expense of making slightly lower profits. So whether the public thinks they make more than they do does not in any way relate to whether they could in fact, pay a higher wage.
  3. By averaging companies across industry it further distorts things to make its point. But that's another subject.
  4. It ignores the fact that if all businesses were to pay a higher minimum wage, than they would likely make the same amount of profit, i.e. one company would not be able to have an economic advantage by paying a lower base wage, since both could raises prices IF they needed to. Granted this goes against talking points that the world is going to fall apart if God forbid the minimum wage was raised, even though it has not been raised in many years, since those talking points have never ever been based on reality. And that is after all, the entire point of the article - to argue against raising the minimum wage.

    But the reality is that raising minimum wage when it is set way too low, which it currently is, benefits the economy as a whole because those lower wage earners will turn around and spend that extra money. It will in turn reduce their dependence on welfare and government programs. And businesses just keep going fine.

    However those who are against minimum wage hike are largely the same folk that told us how Obamacare was going to destroy the economy and cost millions of jobs and cause health insurance costs to skyrocket, none of which has happened. Now the same folk want to convince us that raising minimum wage will "destroy small business" and "raise prices".
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Old 04-04-2015, 03:16 PM
 
Location: Ruidoso, NM
5,667 posts, read 6,562,806 times
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Quote:
Originally Posted by Transplanted99 View Post
Some of the challenge with it is that it is not clear what it is depicting - only says "NIPA Table 1.14", which is rather misleading. Then, there is the problem of what is the measure of "Output"?
You will note that the labor share and capital share add up to 1, so they are mirrors of each other. I don't know precisely how he calculated it, but this is a blog where does the same for the UK, Japan, and France, and compares it to the US: http://blogs.ft.com/andrew-smithers/...ut-to-capital/



I frankly don't know what case you are trying to make regarding corporate profit margins, but I think it is extremely coincidentally amazing that the public would be spot on with their estimate of the share of output going to capital.
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Old 04-04-2015, 04:13 PM
 
105 posts, read 180,979 times
Reputation: 318
tnff

You can get a 4% annual dividend on several quality stocks OR a 12-15% annual return on a commercial real estate investment so busting your hump at a 24/7 job (which is what small business owners do) for a 5% return is not worth it.
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Old 04-04-2015, 04:30 PM
 
105 posts, read 180,979 times
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Green_Mountain

Please tell us exactly what the effective minimum wage should be. What I mean is, at what wage rate will reach an equilibrium between the owner's profit on his investment, time, effort, risk and opportunity costs and the retention of employee jobs?

Should the minimum wage be the same in New York City as it is in Morgantown, West Virginia?

You mention Wal-Mart by stating that they should accept a lower profit in order to give employees a raise. Why? Labor is priced at market rates. If Wal-Mart could not attract quality employees, the market would force them to either shut down OR to pay more money. For its' most recent fiscal year, Wal-Mart's pre-tax profit margin was just 5.1%.

Now, you want them to give each employee a $3,000 raise? Do the math: $3,000 x 1,600,000 US employees = $4.8 billion. This leaves $20 billion in pre-tax profit, for a margin of 4.1%.

Wal-Mart paid $6.2 billion in dividends last year. So, what you are proposing is to give the employees $4.8 billion of stockholders' money not for an increase in productivity, efficiency, safety, attendance or profitability, but just because you have an arbitrary number in mind.

What you are REALLY saying is that employees should get more, and screw the shareholders. With a payout ratio of about 38%, you are taking $1.82 billion in dividends, and $3 billion in cash flow, out of shareholders' pockets for some feel good handout.

The company belongs to the shareholders. Employees are free to leave any time they like. If they have no skills to offer, that is not the fault of Wal-Mart. Since almost anyone can get a job at Wal-Mart, we have to assume that they do not have very strict employment requirements. Because almost anyone can get, and do, this job, Wal-Mart (or any other retailer) does not have to pay Google-like money.

Arbitrarily giving away shareholder money to satisfy some ridiculous fantasy is the stuff of childish liberal fantasy.
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Old 04-04-2015, 06:39 PM
 
Location: Ruidoso, NM
5,667 posts, read 6,562,806 times
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Quote:
Originally Posted by Nick538 View Post
Please tell us exactly what the effective minimum wage should be. What I mean is, at what wage rate will reach an equilibrium between the owner's profit on his investment, time, effort, risk and opportunity costs and the retention of employee jobs?
The employer's profit would not change if there was a universal wage increase, since their competition would be in the same boat. The MW could easily be double what it is, with essentially no effect on aggregate production, demand, or profits.

Quote:
Should the minimum wage be the same in New York City as it is in Morgantown, West Virginia?
The MW sets the lower bound, and it will effect wages in high COL areas as well. People in NY will generally demand more money.

Quote:
You mention Wal-Mart by stating that they should accept a lower profit in order to give employees a raise. Why? Labor is priced at market rates.
Companies that unilaterally raise wages above the going rate for their industry are usually looking to attract and retain better employees, which will hopefully more than pay for itself in greater productivity, rather than give the current ones a gift out of the goodness of their hearts.

Quote:
Employees are free to leave any time they like.
To another similarly crappy job, or no job. Freedom of choice!

Quote:
If they have no skills to offer, that is not the fault of Wal-Mart. Since almost anyone can get a job at Wal-Mart, we have to assume that they do not have very strict employment requirements.
This is true. Wal-Mart tends to bottom feed. I agree that there is no compelling reason for them to raise wages unless they wish to hire better people.

On the other hand a higher MW would likely improve Wal-Mart's sales and profits since it would shift income to the working poor which is a demographic they serve.
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Old 04-04-2015, 10:54 PM
 
Location: Paranoid State
13,044 posts, read 13,815,647 times
Reputation: 15839
Quote:
Originally Posted by Hemlock140 View Post
Having run a business myself for 16 years, averaging 37% profit, I would guess about 10%. I didn't have to pay lobbyists, TV advertising, lawyers, or pay tribute to politicians with campaign contributions like the big corporations are blackmailed to do lest they incur the wrath of politicians.
There. I fixed it for you.
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Old 04-04-2015, 11:04 PM
 
Location: South Texas
4,248 posts, read 4,142,331 times
Reputation: 6051
Quote:
Originally Posted by Green_Mountain View Post
  1. It ignores the fact that if all businesses were to pay a higher minimum wage, than they would likely make the same amount of profit
Raising the MW guarantees that all companies will earn less profit. Raising the MW does not guarantee that all employees will spend all of the increase on their employer's goods and services, which would be the only way that an increase in the MW would not have a negative financial impact on said company.


Raising the MW also guarantees that those employees who invest in the company, say as part of their retirement, will see a smaller ROI which hurts the employee in the long run.
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