A little math education is warranted.
If YOU work 40 hours a week and make a profit of $50,000 in a year, then the following year YOU work 10% more, should you not make 10% more profit.
Another example would be that YOU're a farmer, YOU sell 100 ears of corn for a profit of $10. The next week YOU sell 200 ears of corn for a profit of $20.
Was it wrong for YOU to make a larger profit the second week than the first?
Next math lesson:
YOU start YOUR own business making widgets. Labor costs YOU $25,000, material costs YOU $25,000, Marketing costs YOU $25,000, and production costs YOU $25,000. It costs YOU $100,000 to produce widgets, which you made a profit of 10%, or $10,000.
The following year YOUR workers threaten that if they don't get a cost of living raise, they'll strike, and YOU'll lose your business. So now labor costs you $30,000. Also, China has been expanding, using more and more of Imaginum, the prime material used in making widgets. Material costs are $30,000. Production and Marketing both rise to $30,000 each. And once again YOU've made 10% profit. But last year you made $10,000 and this year you made $12,000.
Now a more in depth math lesson:
Lets combine lesson 1 and 2.
In YOUR 3rd year of business YOUR labor, material, production , and marketing costs all double. But so does YOUR production and sales.
This year YOUR profit it is once again 10%, but your dollar amount is $24,000. Twice what YOU had last year.
Boy are you evil. Wait till Hillary and Nancy get a hold of YOU.
Now to bring that into todays world of oil. If crude oil prices rise from $45 a barrel to $75 a barrel, a 66% increase, shouldn't the oil companies, if they keep the same profit margin, also make 66% more?
Also if consumers use twice as much gas as they did 10 years ago, and crude production costs stay the same, and profit margins stay the same, shouldn't the profits be twice as much?
Oil prices go up and down. As do gas prices. As do profits. But volume keeps going up. And as production goes up so do profits. So to say that profits were flat, when production increased, is really saying alot.
One last thing:
Imagine $12.3 billion in profit in year one. Re-invest that and get a return of 10%. That means year 2 should be $13.5 billion.
Do that again. And year 3 should be $14.8 billion.
Do that again. And year 4 should be $16.2 billion.
Do that again. And year 5 should be $17.8 billion.
One last thing. I used 10% as the magic profit ratio because that is roughly what the oil companies profits are.
10% is also a quite common number in manufacturing and also retail sales profits.
| DOW30 | Oper Margin | Profit Margin |
| MSFT | 37.20 | 28.45 |
| INTC | 31.46 | 22.31 |
| KO | 26.13 | 21.09 |
| MRK | 27.51 | 21.04 |
| JNJ | 26.47 | 20.61 |
| C | 24.46 | 20.44 |
| PFE | 29.90 | 15.76 |
| AXP | 18.68 | 15.39 |
| MO | 25.14 | 15.14 |
| MMM | 23.66 | 15.11 |
| PG | 19.42 | 12.73 |
| MCD | 19.52 | 12.72 |
| GE | 15.07 | 11.05 |
| XOM | 14.93 | 11.01 |
| T | 14.06 | 10.91 |
| JPM | 19.40 | 10.62 |
| VZ | 19.02 | 9.85 |
| AIG | 20.82 | 9.62 |
| IBM | 10.29 | 8.71 |
| DIS | 12.86 | 7.93 |
| CAT | 10.41 | 7.85 |
| DD | 8.07 | 7.71 |
| UTX | 12.13 | 7.18 |
| HD | 11.49 | 7.16 |
| HON | 8.97 | 5.98 |
| AA | 8.15 | 4.71 |
| BA | 4.02 | 4.69 |
| WMT | 4.90 | 3.59 |
| HPQ | 5.72 | 2.77 |
| GM | -7.30 | -5.49 |
|
Exxon's profit margin was 14th out of the 30 Dow components - middle of the pack. They just had more revenue. Note that the other company every liberal hates, Wal*Mart, has very slim operating margins - typical of the retail business. |
I was commenting on the choice of adjectives for a 12.3 billion profit.
what's your point amd what does it have to do with that ?