WASHINGTON (AP) – Two-thirds of U.S. corporations paid no federal income taxes between 1998 and 2005, according to a new report from Congress. The study by the Government Accountability Office, expected to be released Tuesday, said about 68 percent of foreign companies doing business in the U.S. avoided corporate taxes over the same period.
Collectively, the companies reported trillions of dollars in sales, according to GAO’s estimate.
“It’s shameful that so many corporations make big profits and pay nothing to support our country,” said Sen. Byron Dorgan, D-N.D., who asked for the GAO study with Sen. Carl Levin, D-Mich. An outside tax expert, Chris Edwards of the libertarian Cato Institute in Washington, said increasing numbers of limited liability corporations and so-called “S” corporations pay taxes under individual tax codes. “Half of all business income in the United States now ends up going through the individual tax code,” Edwards said. The GAO study did not investigate why corporations weren’t paying federal income taxes or corporate taxes and it did not identify any corporations by name.
More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts. The GAO said it analyzed data from the Internal Revenue Service, examining samples of corporate returns for the years 1998 through 2005.
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# 47 Thomas
“Actually, that *IS* the goal of every business. That’s business 101, Chapter One, Page 1, first sentence.”
LOL Really? Which book? I can prove you wrong with 1 statement. NON FOR PROFITS
“but fundamentally if a business does not maximize profit, it will go out of business to a competitor that did. ”
Simply not true at all. It may. It may not. There are many more determining factors than simply maximizing profit. As long as a company doesn’t operate at a loss it can stay in business forever. There are plenty of local video stores that are still in business even though they have strong competitors that attempt to maximize profit. They find by offering something the competitor cannot, like a large range of foreign films, they keep a key customer base and stay profitable and in business. The reason the competitor cannot is because they are trying to maximize profit and those movies on a large scale lose money for video stores. They may even lose money on the small scale but the renter coming in for that hard to find foreign film will also pick up one or two first run films too. The result is minimal or small profit but a company that is still in business
“Whom do you think would buy an unprofitable business?”
Who said people go into business to sell their company. That is an awfully big assumption. Some people just enjoy running their own business and being able to live off a small profit and then pass it on to their kids. They don’t have to be moguls and sell to the highest bidder.
#50 TomB
“And if you have too much operating capital at the end of the year, the government considers it profit and takes their 35%.”
You need to find another accountant. I would bet I bring in a lot more than you and I don’t pay anywhere near 35% and it is all legal.
“I like to keep 3 months of operating expenses in the bank to handle slow times. ”
3 months? You call that operating capitol? LOL “metric butt loads” LOL
# 54 Mr. Fusion
“#40, TomB,
So your company must return 20-25% every quarter and if it doesn’t you raise the price?
I call bullpoop.”
Yeah I thought something seemed fishy about that too. No mention of less profit or higher percentage rate….. just raise prices because you paid more in taxes. Not a wise business decision. Perhaps one day he will price himself right out of the market.
# 56 Mr. Fusion
Bravo on your retort.
My bet is the same dolts that think it is ok for Corporations to skate on the taxes think it is just peachy that some of them get subsidies from the government in addition to their no tax huge profits.
bullpoop.
Call it what you want. It’s business.
You don’t understand it because you have not taken responsibility for your own actions. Everything is broken because it’s someone else’s fault.
Fusion, I didn’t expect you to understand and you didn’t disappoint.
“Secondly, you overestimate the role of business in the nation. A country is made up of the people. The people make the laws for what benefit them. When it becomes the Corporations that run the country and for whom the country is run, its called fascism. Its happened several times before in history.”
This quote makes me want to hurl in so many different ways.
Are you a Luddite? So you want us all to go live on farms like the Amish?
Your ignorance is simply appalling. You have definitely drunk the liberal Kool-aid crap and it’s gone to your brain.
Obviously to you all businesses are evil and need to be controlled “by the people”. Isn’t that active communism? If we followed your line of reasoning we would all feel good about ourselves while standing in the unemployment line waiting for a free check which never comes because the government is bankrupt because no more companies exist.
Also, all the information on the foreign taxation I referred to is in the links, but you have know basic economics and have set up a business or two to understand what it says.
With you, it’s like trying to teach calculus to someone who hasn’t learned algebra.
#62, c. We have enjoyed enormous benefits but we as a country have not gone nearly far enough. We are still not fighting fire with fire. Not even close.
#66 – “We have enjoyed enormous benefits…” such as?
#50 TomB
“And if you have too much operating capital at the end of the year, the government considers it profit and takes their 35%.”
You need to find another accountant. I would bet I bring in a lot more than you and I don’t pay anywhere near 35% and it is all legal.
I’ve considered it, seriously. I’ve talked to my competitors and they say the same thing (we have coffee every now and then). Some have had to pay more but most have paid less.
And 35% is probably a misnomer. It was 35% of the taxable but it was probably closer to 23% of total profits throughout the year. Still too much.
“I like to keep 3 months of operating expenses in the bank to handle slow times. ”
3 months? You call that operating capitol? LOL “metric butt loads” LOL
No, I call it operating capital. The capitol is Washington, D.C.
Three months is plenty for my business. I usually keep 6 to 8 months of business on the books. That will keep me afloat for nearly a year.
AFA metric butt loads, we more than doubled our size last year. For me, that was a metric butt load.
just raise prices because you paid more in taxes.
If we can’t cut our expenses other places, that’s what happens. I want 25%. Some people want more. Some less. That’s a number I chose to shoot for. It lets me estimate my costs and thus my rates. Some low-risk customers may get a lower rate. But I want 25% of the job in the coffers at the end of the day.
Not a wise business decision. Perhaps one day he will price himself right out of the market.
Doubtful. We are still priced mid-range of our competitors. But I won’t say it won’t happen. That’s the risk entrepreneurs take when they enter the market. Anything is possible.
#66 – I warned you (#27) – Mr ConFusion is the king of fatuous twaddle – he fulfilled my prediction to a ‘T’. He spends his day on this site enlightening the little people. His verbosity is in direct proportion to his ignorance. He will ultimately call you one of his 2 favorite words – “wing-nut” or “moran”[sic] to function as the dessert of his digressive servings.
lol. I secretly enjoy his compulsion to obsessively pounce on everything that displeases him. You’ve got to admire a dogged loser – at a safe distance.
#56
>>> The intent of a Corporation is
>>> to create a product, good, or
>>> service that a consumer will pay
>>> more for than it cost to make.
>> Again, no. The product or service is
>> merely a means to an end. It is no trick
>> to make product or offer
>> services unprofitably.
> Read what I wrote again then
> read your second sentence. Then
> tell me you don’t have a reading
> comprehension problem.
Wow. You still don’t get it. Your statement assumes that price over unit cost is the only way to make profit. There are many ways to make profit that have nothing to do with the unit cost of an item. It is possible to sell a product at a loss but make up the revenue from other sources. Free websites are a good example. In and of themselves, they are a loss leader. However, combined with revenue from advertising they can be profitable. The unit cost of a product is not the only factor in making a company profitable. Another example is money through services while selling a product at below cost. You make your money on the additional services provided that you make up for the loss on products.
>> Cost is not only one way to price a product.
> So you are more than willing to sell
> for less than it cost to market.
Nooo. One more time. If not having my product would cost you X, then *that* (or slightly less) is what it is worth to you to have my product. If you can get the same functionality from a competing product then I must obviously factor that into my pricing as that adds an alternate choice along with simply hiring temps. If my competitor can sell their product for less than it costs me to manufacture, then I either find a way to reduce costs or go out of business.
> It is far better to price it
> to what the value is in
> the market place.
You are almost there. The “market” place is what buyers are willing pay for your product which is only indirectly related to manufacturing costs. If it costs you 10 cents to make a pet rock but people are willing to pay 10 dollars for it, then 10 ten dollars is what you sell it for. If buyers are only willing to pay under cost for product x but at the same time they’ll buy service Y for way over cost, then you can still be profitable.
WAIT A COTTON PICKIN’ MINUTE!
You mean the anti-tax conservative have been lying to us this whole time????????????
THAT CAN’T POSSIBLY BE TRUE!!!!!!!!!!!!!!!!!
#64
>> Actually, that *IS* the goal
> of every business. That’s
>> business 101, Chapter One,
>> Page 1, first sentence.
> LOL Really? Which book?
First..wow. Just wow. That’s like asking where it says in a math book that 2+2=4. To answer your ridiculous question, every microeconomics book I’ve read, every macroeconomics book, managerial accounting books… The list goes on. It is not a new concept.
RE: Not for profit
Sounds like that would true would it? Alas, it is a common misconception. Not for profit” does not mean “no profit”. Not-for-profit business still try to maximize profits. The difference is what they do with the profit. Whereas in typical corporation the profits go to the owners or stakeholders, in not-for-profit the profit goes to “social’ stakeholders or it is reinvested internally. The goals are the same but what is done with the result is different.
RE: Maximizing profit
Clearly you have never run a business. Any business that is not attempting to maximize profits is destined to go out of business.
> As long as a company doesn’t
> operate at a loss it can
> stay in business forever.
There is one scenario where this is true: monopolies. If you own a monopoly on a particular product or service, then yes you can stay in business indefinitely as long as you can cover your costs. Looking past monopolies, competition is what kills your perpetual motion machine. As I said before, eventually a business which is not maximizing profits will go die at the hands of one that does.
RE: Video store
What you are discussing is a niche market. An excellent way to succeed is to provide a service to a specific group of people whose needs are not met by your competitors. If you are the only one providing that product or service, then you have a veritable monopoly. However, do not forget that there are many types of competitors including large corporations. If you are selling fancy foreign videos to customers and someone opens a shop down the road doing the same for less (or with better service, or with better selection etc.) you will go out of business.
Thomas, TomB, montanaguy, Stupido, and other intelligent people of like greater intellect who have contributed to this thread.
It’s refreshing to read that there are some people who DO have a clue!
Thanks!
#53 Master Confusion, Oh goodie! He called me a BUNCH of names, even his pet misspelled MORAN. I’m sooo happy to be recognized and to have my prediction confirmed by such an erudite, philosophical and learned denizen of this little part of the world. God, what a thrill.
cmon wrote:
> Oh for a rational tax
> code to put blood
> suckers like J, who
> produce nothing, out of
> business. How much do we
> consumers pay for tax
> attorneys and accountants?
> How easily could they be
> rendered useless with a
> simplified tax structure?
> How many lawyers are there
> in China?
> Of course we keep electing
> them to “represent” us
> while they continue to
> complicate the tax code to
> ensure full employment.
This is one of the worst hidden costs of our tax system: the cost of tax preparation and accounting. Because the tax code has become so complex, it is difficult, and often impossible, for many people to accomplish their taxes themselves. So, in addition to the cost of taxes people must pay, people also have to add in the cost of tax preparation to their total tax bill.
Some have mentioned replacing the current income tax system with a national sales tax. To me, two of the greatest advantages of a national sales tax is that the consumers will know exactly how much taxes they are paying because it is printed as an itemized item on their sales receipt, and reduced tax peparation costs (the average tax payer will have no federal tax preparation costs).
#61, hannahmontana,
I know you can’t let go of your epoxy-like adherence to the knee-jerk liberal bible doctrine of ‘corporations…uggghhh…evil…tax them to death..let’s get punitive with the evildoers..’
You sound more like a fascist with every post. No substance to add to the discussion.
The rest of your post is equally stupid. You have no idea yet you try to pontificate your wisdom. Thanks but no thanks.
#70, Thomas,
Wow. You still don’t get it. Your statement assumes that price over unit cost is the only way to make profit. There are many ways to make profit that have nothing to do with the unit cost of an item.
Aahh, Thomas, you claim to have studied economics. Would you like to rephrase that claim.
prof·it
n.
1. An advantageous gain or return; benefit.
2. The return received on a business undertaking after all operating expenses have been met.
3.
a. The return received on an investment after all charges have been paid. Often used in the plural.
b. The rate of increase in the net worth of a business enterprise in a given accounting period.
c. Income received from investments or property.
d. The amount received for a commodity or service in excess of the original cost.
It doesn’t matter what product, goods, or service you sell, you must sell something in order to gain a profit.
If your store sells an item for less than cost as a way to entice people into your store, then that is considered a marketing cost. The store itself is considered a capital cost. The salesclerks are labor costs. The electricity to power the lights is an overhead cost as is the wax on the floor, paint on the walls, and bags the shopper carries home their goods. At the end of the day, what you sell has to exceed all those (and other) costs in order to earn a profit. If you don’t, your next stop is the bank to borrow money to pay for all those costs or you are out of business.
You may take that generic example and substitute any other form of business you like. A profit is still the amount of money after deducting all the costs. It doesn’t matter if you produce a product, sell a good, or perform a service.
An economic profit arises when its revenue exceeds the total (opportunity) cost of its inputs
Isn’t it true that US Corps provide the basis for most all other jobs? Well, that’s what my republican representative tells me…
#72, Thomas,
To answer your ridiculous question, every microeconomics book I’ve read, every macroeconomics book, managerial accounting books… The list goes on. It is not a new concept.
Then you wouldn’t mind listing a couple of those books.
RE: Maximizing profit
Clearly you have never run a business. Any business that is not attempting to maximize profits is destined to go out of business.
Any business that does try to maximize profit would be out of business. To increase profit you must reduce costs where ever possible. No advertising. No research. No development. No labor. No maintenance. No company. Try sustainable profits.
For reference,
The Entropy Law and the Economic Process by Nicholas Georgescu-Roegen
(not an easy read, but very enlightening.)
# 72 Thomas
“First..wow. Just wow….. ”
Give me a title then. That is not how any of mine start out.
“Not for profit” does not mean “no profit”. ”
YES IT DOES!!!! That is exactly what it means and for the sake of argument I am defining profit by the accounting principal. If you agree with that definition then perhaps you are confusing income with profit.
Not to mention it is a tax filing status. It doesn’t mean the don’t have an income it just mean that it can exceed the cost of operation. If they do they have to give that money to a cause or charity. That is the general idea. The details are much more complicated like the way they raise the money has serious limitations. For instance they are not supposed to call events fund raisers but instead ask for donations.
You are simply wrong. The Goal of a business is not to “maximize profit” That is a simplistic view of real word business and will quickly lead to an unstable entity. There are many and MORE important issues than just maximizing profit.
“Clearly you have never run a business. Any business that is not attempting to maximize profits is destined to go out of business. ”
First off I run 2 VERY profitable business. One in Commercial Real Estate and One in Post Production. I also co-run a Non for Profit. So get off your high horse because I am someone you can’t bullshit with you pathetic economic education. I run with the like of people you only get to read about and many of them don’t know shit about economics but they sure as fuck know how to make money. Something that you only pretend to know.
“There is one scenario where this is true: monopolies”
It is true for ANY business. as long as you cover your costs you can stay in business. It doesn’t matter if you have tons or no competition. Competition is irrelevant to that concept. Any argument to the contrary is just nonsense. It also doesn’t mean a company can’t grow. Profit is not what makes a company grow. Gross income is all that matters. Hell I know of Hollywood studios that don’t ever profit. It is all on how you do the books and it is all legal. Ask Peter Jackson on how much LOTR profited and then ask the studio. HUGE difference in the numbers there. It is all in how you work the numbers. That is why I know you don’t know what the fuck you are talking about. If you did you would understand how the real world works and how it is vastly different than your imaginary economics class.
“competition is what kills your perpetual motion machine. As I said before, eventually a business which is not maximizing profits will go die at the hands of one that does.”
Nice way to confuse the issue. Too bad it doesn’t change a thing. As long as a business can cover costs it will remain in business. My evidence of the video stores proves you wrong.
“What you are discussing is a niche market.”
So fucking what!!!!!! They are a video store and they are still in business. Are you saying Blockbuster is not their competition???? Blockbuster could put them under if they wanted to but instead they try to “maximize profits” so they can’t because in trying they would have to lose some of that profit.
“An excellent way to succeed is to provide a service to a specific group of people whose needs are not met by your competitors.”
Yeah NO SHIT!!!! Thanks for stating the obvious.
“If you are the only one providing that product or service, then you have a veritable monopoly. …….”
The rest of your blather has nothing to do with “maximizing profits” It is nothing more than proving my point for me. Oh and the a video store selling foreign films is not a monopoly here in Chicago. They have plenty of competition but non of them are attempting to maximize profits as their core business principle. Blockbuster does and they can’t compete because of it.
#68 TomB
“I’ve considered it, seriously.”
You should. SERIOUSLY. The money you spend on a good accountant is made back ten fold in the savings they get you. All legal mind you.
“Still too much.”
Yes it is.
“Three months is plenty for my business. I usually keep 6 to 8 months of business on the books. That will keep me afloat for nearly a year.”
A year? You feel good about that? I would be sweating my balls off if I only had a year of operating capital and receipts. How do you know those 6 to 8 months won’t belly up on you? I could operate for the next 20 years and lose a million a year and still be able to run my business. I would be a fool to do so but that is the kind of stability I require. And I don’t need to raise prices because of some small increase in cost or taxes. I just go out and get more business instead. That is what a smart business man does. If it requires looking at alternative revenue streams then so be it. Turn out a good product and charge a fair price and you should do just fine. That sounds like what you are doing. Why you would need to fuck with that formula and raise prices just because you lost a little profit makes no sense.
“No, I call it operating capital. The capitol is Washington, D.C.”
Thank you for correcting my spelling but you too have made an error. Capital is spelled the same way for a city or for accumulated goods. Capitol is the spelling for the building in D.C. Not D.C itself.
“If we can’t cut our expenses other places, that’s what happens. ”
What ever happened to hard work???? What is this obsession with profit margin? You could earn 80% profit margin and still not make as much as someone that get 10% if that guy with 10% busts his balls and and out performs you. They are also the ones that will steal your clients because they can do it cheaper no matter how many costs you cut. They still have a 70% advantage over you.
“Doubtful. We are still priced mid-range of our competitors. ”
You sound reasonable why this crazy position on this issue?
#78
You conveniently changed your argument. Let’s look at your original statement from #70 (emphasis added)
That statement implies that the only means of making a profit is by marking up the price over its marginal cost of production. However, as you have now admitted in #78, an entirely different way of making a profit is to have *multiple* products or services whereby you sell a given product UNDER its marginal cost (contrary to your idea above) but overcome the loss by selling a different product or service sufficiently above its marginal cost to overcome the losses by other products. This is evaluating profit in terms of the corporations TOTAL benefit/revenue over its total cost. In this scheme, you price products and services based on the consumers opportunity cost of choosing something else which can include a competitor’s product or service.
Thus, this statement from #78 is not entirely accurate:
For example, printer companies sell their printers at loss and makeup for the loss through replacement cartridges. This is not a “marketing” ploy but rather a sound business strategy for maximizing total profit.
#80
The first three books I grabbed from my bookshelf which happen to all be from my college years:
Microeconomics and Behavior by Robert H. Frank.
“economists traditionally assume that the firm’s central objective is to maximize [economic] profits.”.
Managerial Accounting – An introduction to concepts, methods and uses. by Davidson, Maher, Stickney, Weil
There is an entire chapter on profit maximization and how accounting profit differs from an economist profit. This statement phrases it well: The objective of a firm is profitability and liquidity.
Intermediate Microeconomics by Hal R Varian
An entire chapter devoted to Profit Maximization
Then there is a two minute google search:
“Firms are defined as economic organizations that purchase inputs and sell outputs. We will assume that a firm’s objective is to maximize profits.”
http://www.basiceconomics.info/costs-and-production.php
In economics, the concept of firms maximizing profit is fundamental to almost every microeconomic theory. It is an extension of the idea of maximizing utility. If you are attempting to take my statement about Chapter 1, Sentence 1 literally, then you are simply being pedantic. Just as 2+2=4 is not the first statement of any mathematics but rather conveys the fundamental nature of the equation so too does idea that firms strive to maximize (economic) profit.
> Any business that does try to maximize
> profit would be out of business. To
> increase profit you must reduce costs where
> ever possible. No advertising. No research.
> No development. No labor. No maintenance.
> No company. Try sustainable profits
Not even remotely true. If you did all those things, your revenue would got to zero. No revenue = no profit. To maximize profit you need to maximize revenue as well as minimize cost. Most businesses cannot maximize revenue without advertising for example.
Good Lord. This is getting tedious.
#82
RE: Not for profit
On the contrary, not-for-profit companies make profit. An example would be a company that received more grant money than it spent in a given year. Many not-for-profit companies for example, augment their revenue by investing grants and donations thereby receiving interest on the investments. The fundamental difference is in what they do with that profit. Generally, they reinvest in the firm to extend and improve their ability to serve their not-for-profit.
> The Goal of a business is not to
> “maximize profit”
You do realize that you are arguing against every book on business and economics written for the past 100 years. Let’s be clear, maximizing *economic* profit is not the *only* objective of a business however it is the *primary* objective. One can maximize profit in many ways. The Japanese for example took losses on the production of cameras for years until they captured the market. Their objective was the same but they had longer timelines and placed greater value on market share than American companies. They still strove to maximize benefit and minimize costs both implicit and explicit.
> First off I run 2 VERY profitable business.
Wait, I thought you said maximizing profit was not important. Why care about profitability? ;->
Clearly your businesses became profitable by maximizing revenue and minimizing cost did they not? Are you telling me that you took the money/income the firm made and spent it wildly on Learjets and hookers? No? You mean you did not spend everything that came in? In your non-for-profit business, what happened if they received more money than they spent in a given year? Did they throw it in a trash can and burn it or did they reinvest it in the company or did they continue to use for its original social purposes (or social stakeholders)?
> It is true for ANY business. as long
> as you cover your costs you can stay
> in business.
The hole in your argument is the assumption that a business can continue making the same revenue indefinitely. When competition is introduced, it will work to bleed off demand and thus revenue unless there are barriers which prevent it. This gets back to the monopoly concept I mentioned earlier. If your store is located in a spot with tons of traffic and there is no other store in the same vicinity, then you are shielded from competition. A monopoly (or an oligopoly) can get away with tremendous inefficiencies.
I happened to know a lot about the film industry and how they are financed. If out of ten films, nine are duds and one is a hit, a studio can still turn a profit. That scenario is far more desirable then to make ten mediocre films which just cover costs. In the later scenario, that studio will eventually be consumed my its competition. Thus, while LOTR made hundreds of millions, Time Warner was bleeding money like a teenage girl on her first period. The films were profitable but the firm was not.
RE: More video store
If your video store is selling fancy foreign films, then BlockBluster is probably not their competition. If they are selling the same titles, then from the consumer’s viewpoint, it comes down to which one maximizes their utility or said another way, which one maximizes their benefit over cost. Blockbuster might be cheaper but it has a crappy selection. The local video store might be more expensive but it is closer and has what they want. Which titles the video store chooses is directly related to maximizing profit. They choose titles that will maximize revenue based on their customers which they know better than their competition. Assuming their costs remain the same that *is* maximizing profit.
“Generally, they reinvest in the firm to extend and improve their ability to serve their not-for-profit.”
Well there is your problem. You see that as profit. It is not. In the real world that is called operating costs.
“You do realize that you are arguing against every book on business and economics written for the past 100 years. ”
No I am not and I will once again ask you to show me the book that says that on the first page first paragraph and first sentence. Not a variation of it but that exactly. If anyone tells you that the “purpose” of a business is to “maximize a profit” They don’t know anything about business and instead are pundits for the wannbe culture in America. Maximizing profit is such a simplistic view of a business it make me sad to think that schools may be teaching that. That isn’t business talk that is Wall Street talk and they don’t give a shit about business all they care aboout is the money they make from it. If I could count the times that Venture capitalists, who’s purpose is to “maximize profit”, have fuck up a company I would do nothing else the rest of my life but add numbers.
“Wait, I thought you said maximizing profit was not important. ”
Nope never said it. I however do not think it is the primary goal of a business. Which by the way is to my understanding To fill a need in the market place and create sustainable revenue. Not to MAXIMIZE PROFIT as you learned in your economic mis-information class.
“Are you telling me that you took the money/income the firm made and spent it wildly on Learjets and hookers? ”
Hookers? No.
“Did they throw it in a trash can and burn it”
Now you are just silly.
” or did they reinvest it in the company or did they continue to use for its original social purposes ”
The put it into programs to help people. That doesn’t make the money “PROFIT” It is still operating costs or expenditures. So zero profit. A Not for profit can have money in the bank at the end of the year and it still doesn’t make it “profit”.
“The hole in your argument is the assumption that a business can continue making the same revenue indefinitely.”
Yeah the hole in my argument. LOL that’s a laugh.
“When competition is introduced, it will work to bleed off demand and thus revenue unless there are barriers which prevent it. ”
Yeah so? Doesn’t mean they will necessarily go out of business. They can simply adapt their business to restore that revenue or bust there as and sell their product as better. They don’t need to “maximize profit” they just need to cover their costs. Some people just like running their own business can’t you get that? They don’t need to “maximize profit”. They found a need in the market and stepped up to fill it with a fair priced product or service.
“I happened to know a lot about the film industry and how they are financed. ”
Yeah me too. I doubt seriously your claim too because if you did you would know they turn a profit without officially turning a profit.
“The films were profitable but the firm was not.”
Apparently you aren’t as up on the Hollywood scene as you think. Yes the films were profitable but New Line, which until Feb of this years was a separate entity owned by Time Warner but not operated by them, claimed the films didn’t make a profit or at least not as big a profit as we all think they did. They do this all the time. Work the books so they show a loss. When in fact the money went into CEO benefit packages and paying a network company exorbitant fees for work but keeping the money in the family. If you knew as much as you claim about how movies are financed you would know exactly what I am talking about. IT IS NO SECRET IN HOLLYWOOD. That is why most big actors ask for their cut off the gross receipts not profit. They know that the studios, like most large corporations, are experts in hiding profits.
“If your video store is selling fancy foreign films, then Blockbuster is probably not their competition. ”
Wrong!!!! Blockbuster was their competition but Blockbuster lost!!!!!
They sell and rent all types of movies. They just carry a larger selection of foreign films than your typical Blockbuster. They work the hook. They get you coming there for the specialties and rent you one or two first run movies too. After a while they are your one and only video store. And Yes Blockbusters have opened in the neighborhood but they adapted by lowering their rental price below Blockbuster and offering things like discounts. Blockbuster because it is trying to maximize profit can’t do that and they can’t offer the foreign selection hence THAT blockbuster closed. Today that same little video store has kept it’s prices at that level and still offers those discounts despite not having to compete with Blockbuster anymore. That little video store has been in business for over 20 years.
“Blockbuster might be cheaper but it has a crappy selection. The local video store might be more expensive but it is closer and has what they want. ”
Wrong!!!!! Blockbuster was more expensive. Because they needed to maximize profit. To bad the got beat by a little Asian man and his son.
“They choose titles that will maximize revenue based on their customers which they know better than their competition. Assuming their costs remain the same that *is* maximizing profit”
Too bad for you that they could have jacked up the prices once their competition went away but they didn’t. Why? Because they are good business men!!!!!!!! They know people.
Fuck your economic theories. They don’t mean shit in the real world. If all the economists out there are so fucking smart how come they all say different shit and non of them ever seem to predict (accurately and not using the tactics of a charlatan) what is going to happen. I will tell you why…..BECAUSE THEY DON”T KNOW PEOPLE!!!!!!! That is what make a good business man and good economic practice. Not how much theory you learned. I would take a street hustler to run my businesses before I would ever pick so dipshit economist and his theories. In the real world theory doesn’t mean SHIT!!!!! I get little assholes like you sitting across the table from me all the time. They are young and they think they know all about business and how they should be run…. By the end of the meeting not only are they giving me MORE than I was asking for but I am paying half as much for it. That is what happens to “theorist”, like you, in the real world.
Your ideas and understanding of the business world is that of a middle class dolt that wishes to be rich. I bet I know junk yard owners that have more money than you and are far better at understanding business and how it works than you will ever hope to.
#84, Thomas,
> Any business that does try to maximize
> profit would be out of business. To
> increase profit you must reduce costs where
> ever possible. No advertising. No research.
> No development. No labor. No maintenance.
> No company. Try sustainable profits Not even remotely true.
Not even remotely true. If you did all those things, your revenue would got to zero.
Hey Zeus H. Christ !!! That is exactly what I have been saying all along. You finally got the message.
To maximize profit you need to maximize revenue as well as minimize cost.
Oopps, there you go with the idiocy again. Besides, you are now adding a quantity you didn’t have earlier.
Most businesses cannot maximize revenue without advertising for example.
BUT, if they spend money on non-essential items, such as marketing, you will have less profit. Hence, you are not maximizing your profit. Thus, why I call it “sustainable profit”.
As Edwards Deming pointed out, it isn’t who makes the biggest profit that wins, it’s who is still in the game at the end that wins. The trick isn’t to make the biggest profit, it is to make the best profit over a reasonable period of time. Maximizing all your resources to maximize that profit comes at the cost of long term stability.
***
You wrote that a Robert H. Frank’s Microeconomics and Behavior was one of your texts. Unfortunately I can’t access it through Google books, but what I did find by Franks, and is pertinent to this discussion is this,:
In brief, the president’s claim that tax cuts to the owners of small businesses will stimulate them to hire more workers flies in the face of bedrock principles outlined in every introductory economics textbook.
It is for that reason I believe there was more to the quote than what you provided.
# 86 Thomas
Holy Fuck I couldn’t ask for a better avocate that this.
Speaker: Lord John Browne
Speech date: 02 May 2006
Venue: MIT, Boston
Title: BP Chief Executive Officer
“So that’s why I thought the most important thing I could talk about today is business – and in particular its purpose.
I’ll talk mostly about BP, but I believe the same points are true for all businesses – large and small.
There are two over simplified views about the role of business, and I believe they are both wrong.
The first says that the purpose of business is to make money, and to deliver something called shareholder value.
The other says that we should do that, but that to balance what by implication we are taking out of society in the form of profits, we should pursue a programme of what is called “corporate social responsibility” – a programme of good works and philanthropy – which is distinct from the business we are actually doing.
Why are those ideas too simple?
Well I don’t think that a business which just generated money would be a very good business. ”
“I believe that a good successful business is part of society, and exists to meet society’s needs. That is the purpose of business at the highest level.
We need to make money to reward those who have trusted us with their investment, but that isn’t our primary purpose. ”
HOLY FUCK!!!!!! Did you hear that Thomas? A real world CEO of a HUGE oil company says you have your head up your ass. You better have one hell of a comback because I just handed you your ass on a platter!!!! I think this even backs up Mr. fusion too.
#84, Thomas,
You conveniently changed your argument. Let’s look at your original statement from #70 (emphasis added)
The intent of a Corporation is to create *A* product, good, or service that a consumer will pay more for than it cost to make.
That statement implies that the only means of making a profit is by marking up the price over its marginal cost of production.
No, that does not imply anything. I plainly state that a profit is creating a product, good, or service a consumer will pay more for than it cost to make.
as you have now admitted in #78, an entirely different way of making a profit …
Nope. You still have to sell for more than it costs in order to make a profit.
This is evaluating profit in terms of the corporations TOTAL benefit/revenue over its total cost.
This is just a bullshit way of saying “make more money than it cost to run the business” which is the definition I put on profit. If you feel the need to argue such minutia and wrong points then you don’t understand economics. Or business.
It doesn’t matter if you own a car repair, women’s shoe store, you’re a lawyer, or you make bird houses from popsicle sticks. At the end of the day you must sell your product, goods, or services for more than what it cost you to provide those products, goods, or services. Advertising, marketing, maintenance, research and development, raw materials, equipment, inventory, real estate, utilities, taxes, and license fees are all expenses. They must all be paid before any profit is realized.
Go back to my #78. I even linked the definition of profit for you. But no, you are still off on some weird tangent demonstrating what I already said.
You are so blind to what was written you have to change it.
Thus, this statement from #78 is not entirely accurate:
If your store sells an item for less than cost as a way to entice people into your store, then that is considered a marketing cost.
For example, printer companies sell their printers at loss and makeup for the loss through replacement cartridges. This is not a “marketing” ploy but rather a sound business strategy for maximizing total profit.
Just what the eff do you think a Marketing Department does? Eff your “ploy”. It is still a cost to the business designed to entice more consumers to purchase more goods. The same as the advertising, attractively attired salespeople, clean windows, free parking, shopping bags with the store logo, etc.
Geeze, the more you write, the more and more it becomes apparent you don’t understand basic economics or business management. Somehow I get the impression your career is currently being third shift supervisor at some fast food dive.
Earlier you posted a book by Robert Frank. I suggest you start reading some of his writing.
#87, “J”
Maximizing profit is such a simplistic view of a business it make me sad to think that schools may be teaching that. That isn’t business talk that is Wall Street talk and they don’t give a shit about business all they care about is the money they make from it. If I could count the times that Venture capitalists, who’s purpose is to “maximize profit”, have fuck up a company I would do nothing else the rest of my life but add numbers.
Very well said. What I have been trying to say but kept missing the mark. This makes it easy to see the true manager from the wannabe.
#87
>> Generally, they reinvest in the firm
>> to extend and improve their ability
>> to serve their not-for-profit.
> Well there is your problem. You see
> that as profit. It is not. In the
> real world that is called operating costs.
So, if you start a not-for-profit business and I give you 100K but you spend 20K, you assume the other 80K is operating cost?! Some would call that fraud.
RE: Maximizing profit
I showed you four. I doubt you could find an economics books that does not discuss profit maximization.
You are only thinking of “accounting” profit as in balance sheets and income statements which completely ignores the concept of opportunity cost. That is not the same thing as what an econmists calls profit.
I never said that the “purpose” of business was to maximize profits. I said that maximizing profits is the *goal* of every business. I
>> I happened to know a lot about
>> the film industry and how they are financed.
> Yeah me too. I doubt seriously your claim
> too because if you did you would know they
> turn a profit without officially turning a profit.
I’m not talking about “reported profit” as in what you put on your tax return. Whether a film actually shows a profit to the government is not necessarily related as to whether it is economically profitabile to the business. Take TomB’s example. If he had taken his profit and spent it on trucks, technically he would have had reported no profit. Yet, he clearly has gained more than he spent from his perspective.
The rest of your post was ranting dribble. That you have run successful businesses does not imply that you understand the dynamics of economics. A person can successfully use a hammer without understanding physics just a person can win the lottery without knowing anything about mathematics. If you strive in increase revenue and minimize cost, you are working towards the goal of maximizing profit as does every business. Whether you understand that is how you succeeded is irrelevant.
#88
> That is exactly what I have been saying…
Not true. Re-read your posts. Only now do you recognize that to maximize profit you must also account for revenue.
You still do not get there are two ways of measuring economic profit of which one does not relate necessarily to the cost of production. Apparently, you still have trouble understanding the idea of spending money as a means of increasing revenue which can then increase profits.
RE: Timeframe
Why is it so difficult to understand that getting the “best” profit over the long haul *IS* maximizing profit. If that is the best you can achieve over that time period, it is maximized.
I have no idea how your link from Franks is relevant so I’ll ignore.
#89
> The first says that the
> purpose of
> business is to make money, and
> to deliver something called
> shareholder value.
I would agree that it is incorrect because it does not account for opportunity cost which are ignored by accountants and are part of the bedrock of economics.
RE: Corporate social responsibility
All that means is that Franks is recognizing that there are many costs not accounted for by bean counters and I would agree.
> Well I don’t think that a business
> which just generated money
> would be a very good business.
First, there is no such business as all business involve humans to some degree. If a business coldly made money at the expense of say employee happiness, no one would work for them. Such a model is only sustainable for short periods.
> A real world CEO of a HUGE
> oil company says you have
> your head up your ass.
On contrary, that real world CEO agrees with me but you are too wrapped up in thinking that profit only refers to costs espoused by a CPA. If for example you run a business with a corrosive work environment, that creates a real cost in terms of turnover, loyalty and your ability to hire talent but is, in the short term, difficult to quantify and yet is just as important to the balance sheet.
#90
> I plainly state that a profit is creating a
> product, good, or service a consumer will pay
> more for than it cost to make.
Printers break your example. Printers are sold below what it costs to produce them including fixed and variable costs. You seem incapable of understanding that a margin over production cost is only one way to make profit. The other is *total* profit of the *corporation* not just on a single product. *Total* profit and *marginal* profit are very different concepts.
You keep saying you understand and yet you continue to phrase your responses in a way that says differently.
Once again, you have flipped the bozo bit Confusion. You are living proof that liberals don’t grok economics.