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The Unmanned Writer |
First, in April order your goods (let's use Best Buy who orders 100,000 OLED tv's which are bought for $250 ea with an MSRP of $1,000 and "normal" price of $800) for delivery beginning in June and ending in Sept. Second, once received the orders are depreciated on a two week schedule where orders received in Sept are valued at $100 (against the purchase price of $250) and originals are at $0 for tax purposes. Third, sell 100% of your product for $500 each in one day. The business makes a hefty profit on a product which, on the books and after taxes, appears worthless. Your state and local government are really happy because they will receive taxes on each purchase (nearly 11% in CA). Welcome to Friday's lesson of business 501. Life moves pretty fast. If you don't stop and look around once in a while, you could miss it. "If dogs don't go to Heaven, I want to go where they go" Will Rogers The definition of the words we used, carry a meaning of their own... | ||
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| I believe in the principle of Due Process  |
Brilliant, except inventory is not depreciated, usually. Moreover, if you could write them off to zero, you still have the revenue when they are sold, as well as the “depreciation expense.” My retail model is the Jewish guy I sold clothes for. His secret, as he often told me, was to buy for $1, sell for $4 and be happy to make 4%. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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| The Unmanned Writer |
Usually except the costing of warehouse space. That's where the product is deprecated. Against its storage costs. (Also, inventory costs are depreciated nowadays, wether as used inventory or new.) Would that work (legally)? Life moves pretty fast. If you don't stop and look around once in a while, you could miss it. "If dogs don't go to Heaven, I want to go where they go" Will Rogers The definition of the words we used, carry a meaning of their own... | |||
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| I believe in the principle of Due Process |
Buy 100,000 TVs for $250 each, store them in a warehouse for a couple months, then sell them all for $500 ea. Sales $50,000,000 COGS 25,000,000 Warehouse $100,000 Net $24,900,000 Or Sales $50,000,000 COGS. 10,000,000. (500 TVs $100 ea.) Depreciation $ 15,000,000 Warehouse $100,000 Net $24,900,000 Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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Member |
I can assure you there is so little margin in selling all but the highest end or commercial flat panels that you would wonder why anyone would sell them at all. | |||
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| The Unmanned Writer |
$24.9M profit multiplied by four to 12 products (less advertising costs which are needed this year to ensure bedlam next Black Friday on the product de jour. Life moves pretty fast. If you don't stop and look around once in a while, you could miss it. "If dogs don't go to Heaven, I want to go where they go" Will Rogers The definition of the words we used, carry a meaning of their own... | |||
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| The Unmanned Writer |
$1,000 MSRP is not top end. Plus, the businesses' cost per unit are 40%-50% of what was paid. Book value is what investors/ owners (one and the same) consider when determining the value of a company. Get caught short handed like Circuit City and well, belly up club has a new member. Life moves pretty fast. If you don't stop and look around once in a while, you could miss it. "If dogs don't go to Heaven, I want to go where they go" Will Rogers The definition of the words we used, carry a meaning of their own... | |||
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| I believe in the principle of Due Process |
So what role does book value play in valuing a company? Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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His Royal Hiney |
Product that can be sold isn't depreciated in the warehouse. Product isn't depreciated against its storage costs. Warehousing cost is an expense captured separately. Warehousing cost is "baked into" the sales price under standard costing procedures. NOBODY wants their inventory depreciated. Even rusting metal in the yard has been known not to be depreciated because inventory is considered assets and its value is in the balance sheet. To depreciate inventory, you incur depreciation costs. And who wants to incur costs of any kind and at the same time lose the value of your assets? Especially if you have to make a quarter end report before you gain back all the depreciation that you took? The "hefty" profit made on "worthless" product simply gets cancelled out by the depreciation expense that you took out. There's no benefit. Besides that, you can't have delivery in June for sale in November. That's six months. Assuming the most liberal terms of payment due in 90 days, you're tying up your cash for 3 months, more likely 5 months. Nobody wants to tie up their money in inventory. It's just like what the mailman said trying to deliver mail to a multi-level condo apartment in Hong Kong with so many same names: "That's Wong on so many levels." "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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| His Royal Hiney |
Book value is only one factor considered by investors when determining the value of a company. It's not the only one. There are other factors. Another factor with perhaps more weight is future earnings potential. That's the reason why start-up companies with negative earnings can even command such hefty prices. On the flip side, who cares if you have $1 million in inventory today if tomorrow, you're faced with a lawsuit, or the government shuts you down, or a competitor launches a product that makes your product obsolete? "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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אַרְיֵה |
Your math is off. Buy for $1, sell for $4, that's only a 3% mark-up. הרחפת שלי מלאה בצלופחים | |||
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| I believe in the principle of Due Process |
Yep. I mushed the selling price. His goal, what made him happy, was to make 4%. He sold for $5. I knew I’d never make it in retail. Luckily, I have enough willpower to control the driving ambition that rages within me. When you had the votes, we did things your way. Now, we have the votes and you will be doing things our way. This lesson in political reality from Lyndon B. Johnson "Some things are apparent. Where government moves in, community retreats, civil society disintegrates and our ability to control our own destiny atrophies. The result is: families under siege; war in the streets; unapologetic expropriation of property; the precipitous decline of the rule of law; the rapid rise of corruption; the loss of civility and the triumph of deceit. The result is a debased, debauched culture which finds moral depravity entertaining and virtue contemptible." - Justice Janice Rogers Brown | |||
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