Politicians often refer to some companies or industries as being guilty of making excessive profits. They toss out a huge number like 850 million but never give a percentage. That's like saying Bill Smith made a outrageous profit of $4,000 on his savings account but not telling us that his savings account is worth $100,000 and that the $4,000 is 4 %. There is no question that with the recent financial fiasco brought about by some large companies and their CEO's, that greed abounds, but that's not all companies. The average guy on the street can relate to a percentage, but most of us choke when we hear 850 million.
What do you think is excessive profit and how do you measure it?
What is Excessive Profit?
What is Excessive Profit?
Lon;1013160 wrote: Politicians often refer to some companies or industries as being guilty of making excessive profits. They toss out a huge number like 850 million but never give a percentage. That's like saying Bill Smith made a outrageous profit of $4,000 on his savings account but not telling us that his savings account is worth $100,000 and that the $4,000 is 4 %. There is no question that with the recent financial fiasco brought about by some large companies and their CEO's, that greed abounds, but that's not all companies. The average guy on the street can relate to a percentage, but most of us choke when we hear 850 million.
What do you think is excessive profit and how do you measure it?
Percentage return on investment - I would suggest 10% as being a reasonable figure.
What do you think is excessive profit and how do you measure it?
Percentage return on investment - I would suggest 10% as being a reasonable figure.
What is Excessive Profit?
Bryn Mawr;1013175 wrote: Percentage return on investment - I would suggest 10% as being a reasonable figure.
That would put most clothing and furniture retailers out of business. Mark up can be 400-500% or more. Actual profit a bit higher than 10% The capital cost to set up manufacture are such you need big profits to make it worthwhile in some industries. If a car loses 50% of it's value in the first year gives you an idea how much it's really worth. Companies charge what the market will pay.
posted by lon
Politicians often refer to some companies or industries as being guilty of making excessive profits. They toss out a huge number like 850 million but never give a percentage. That's like saying Bill Smith made a outrageous profit of $4,000 on his savings account but not telling us that his savings account is worth $100,000 and that the $4,000 is 4 %. There is no question that with the recent financial fiasco brought about by some large companies and their CEO's, that greed abounds, but that's not all companies. The average guy on the street can relate to a percentage, but most of us choke when we hear 850 million.
What do you think is excessive profit and how do you measure it?
I think you need to distinguish between industries that are arguably non essential-like fashion-where people can choose whether or not to buy, (fashion shoes costing £400 that are ruined of you step in a puddle for instance) and ones that are essential like utilities and food retailing that people must have. Excessive profit are when a company takes advantage of it's competitive position to basically rip people off.
No capitalist worthy of the name would want to see cartels or monopolies being allowed to develop. You need regulation to prevent it happening and take steps to make it illegal. We have walmart and Tesco here but measures exist to prevent them cornering too large a share of the retail market and forcing competitors out of business.
Utilities are a political issue here. Once nationalised they were sold off in the eighties and now private companies are raking in huge profits from consumers who have little choice in where they buy-the competition bring down prices argument falls down when the gas all comes from the same source. We have legislation to stop utility companies disconnecting people from water and power supplies-especially if they have children or pensioners with little income-for non payment if it's due to simple poverty rather malice aforethought. We consider it morally repugnant.
That would put most clothing and furniture retailers out of business. Mark up can be 400-500% or more. Actual profit a bit higher than 10% The capital cost to set up manufacture are such you need big profits to make it worthwhile in some industries. If a car loses 50% of it's value in the first year gives you an idea how much it's really worth. Companies charge what the market will pay.
posted by lon
Politicians often refer to some companies or industries as being guilty of making excessive profits. They toss out a huge number like 850 million but never give a percentage. That's like saying Bill Smith made a outrageous profit of $4,000 on his savings account but not telling us that his savings account is worth $100,000 and that the $4,000 is 4 %. There is no question that with the recent financial fiasco brought about by some large companies and their CEO's, that greed abounds, but that's not all companies. The average guy on the street can relate to a percentage, but most of us choke when we hear 850 million.
What do you think is excessive profit and how do you measure it?
I think you need to distinguish between industries that are arguably non essential-like fashion-where people can choose whether or not to buy, (fashion shoes costing £400 that are ruined of you step in a puddle for instance) and ones that are essential like utilities and food retailing that people must have. Excessive profit are when a company takes advantage of it's competitive position to basically rip people off.
No capitalist worthy of the name would want to see cartels or monopolies being allowed to develop. You need regulation to prevent it happening and take steps to make it illegal. We have walmart and Tesco here but measures exist to prevent them cornering too large a share of the retail market and forcing competitors out of business.
Utilities are a political issue here. Once nationalised they were sold off in the eighties and now private companies are raking in huge profits from consumers who have little choice in where they buy-the competition bring down prices argument falls down when the gas all comes from the same source. We have legislation to stop utility companies disconnecting people from water and power supplies-especially if they have children or pensioners with little income-for non payment if it's due to simple poverty rather malice aforethought. We consider it morally repugnant.
What is Excessive Profit?
gmc;1013453 wrote: That would put most clothing and furniture retailers out of business. Mark up can be 400-500% or more. Actual profit a bit higher than 10% The capital cost to set up manufacture are such you need big profits to make it worthwhile in some industries. If a car loses 50% of it's value in the first year gives you an idea how much it's really worth. Companies charge what the market will pay.
This is why I specified return on investment rather than mark-up or return on outlay. If the total amount you have invested in the venture is £1M then you would expect a return of £100K pa. If achieving this entails a mark-up of 400% then so be it - any less and you might as well park the money in the building society and get 6% with no risk (ha ha)
This is why I specified return on investment rather than mark-up or return on outlay. If the total amount you have invested in the venture is £1M then you would expect a return of £100K pa. If achieving this entails a mark-up of 400% then so be it - any less and you might as well park the money in the building society and get 6% with no risk (ha ha)
What is Excessive Profit?
Bryn Mawr;1014122 wrote: This is why I specified return on investment rather than mark-up or return on outlay. If the total amount you have invested in the venture is £1M then you would expect a return of £100K pa. If achieving this entails a mark-up of 400% then so be it - any less and you might as well park the money in the building society and get 6% with no risk (ha ha)
Net return on food retailing is less than 10%-the big supermarkets live on turnover and screwing their suppliers to the floor. Small food retailers just can't compete. Non food net return 25-35%.
Net return on food retailing is less than 10%-the big supermarkets live on turnover and screwing their suppliers to the floor. Small food retailers just can't compete. Non food net return 25-35%.
What is Excessive Profit?
What would you gentlemen consider a good return on a rental home as a percentage of it's fair market value, and, in your part of the world is that the case?
What is Excessive Profit?
Lon;1014287 wrote: What would you gentlemen consider a good return on a rental home as a percentage of it's fair market value, and, in your part of the world is that the case?
Typical Loan to value for a buy to let property is 85% the rent needs to cover the mortgage payment on an interest only basis-slight variations amongst lenders but typically 125% of the payment needs to be covered-less if the loan to value is less. As time goes on and property values rise and rents go up then the yield gets higher and higher.
It varies from area to area. There is a finite amount people can pay for rent so you can't just shove rent up willy nilly or you end up with no tenants a mortgage to pay on a falling property market.
It's like any other business venture if you use common sense and don't get greedy expecting massive returns you're OK. The bottom has fallen out the BTL market but the only ones in trouble are the speculative buyers that assumed prices would always go up. Better two properties at £100,000 each that you can rent easily than one at £200,000 with no tenant because the rental income you can ask for isn't automatically twice as much because the property cost twice as much. I live near Edinburgh but the rental you can get an a flat in Edinburgh isn't that much different from what you can get on a flat in the outskirts. People bought property and rented them it for less than the mortgage because property always goes up right! They expected to make on the capital appreciation. Teach them to be so greedy and push house prices up to ridiculous levels.
london is pretty bad.. The south east of england is where house prices rocketed the rest of the country there was a lot less speculation. It's all relative in other words.
If a flat bought last year to let out at £260,000 last year is now only worth £160,000 and on the market because the owner can't get a tenant then I have little sympathy for the seller. Investments go up as well as down-it's hardly a big surprise when they go down is it? He was speculating on a rising prioperty market and lost out- tough ****. Does bring it within reach of a first time buyer though.
Typical Loan to value for a buy to let property is 85% the rent needs to cover the mortgage payment on an interest only basis-slight variations amongst lenders but typically 125% of the payment needs to be covered-less if the loan to value is less. As time goes on and property values rise and rents go up then the yield gets higher and higher.
It varies from area to area. There is a finite amount people can pay for rent so you can't just shove rent up willy nilly or you end up with no tenants a mortgage to pay on a falling property market.
It's like any other business venture if you use common sense and don't get greedy expecting massive returns you're OK. The bottom has fallen out the BTL market but the only ones in trouble are the speculative buyers that assumed prices would always go up. Better two properties at £100,000 each that you can rent easily than one at £200,000 with no tenant because the rental income you can ask for isn't automatically twice as much because the property cost twice as much. I live near Edinburgh but the rental you can get an a flat in Edinburgh isn't that much different from what you can get on a flat in the outskirts. People bought property and rented them it for less than the mortgage because property always goes up right! They expected to make on the capital appreciation. Teach them to be so greedy and push house prices up to ridiculous levels.
london is pretty bad.. The south east of england is where house prices rocketed the rest of the country there was a lot less speculation. It's all relative in other words.
If a flat bought last year to let out at £260,000 last year is now only worth £160,000 and on the market because the owner can't get a tenant then I have little sympathy for the seller. Investments go up as well as down-it's hardly a big surprise when they go down is it? He was speculating on a rising prioperty market and lost out- tough ****. Does bring it within reach of a first time buyer though.
What is Excessive Profit?
gmc;1014872 wrote: Typical Loan to value for a buy to let property is 85% the rent needs to cover the mortgage payment on an interest only basis-slight variations amongst lenders but typically 125% of the payment needs to be covered-less if the loan to value is less. As time goes on and property values rise and rents go up then the yield gets higher and higher.
It varies from area to area. There is a finite amount people can pay for rent so you can't just shove rent up willy nilly or you end up with no tenants a mortgage to pay on a falling property market.
It's like any other business venture if you use common sense and don't get greedy expecting massive returns you're OK. The bottom has fallen out the BTL market but the only ones in trouble are the speculative buyers that assumed prices would always go up. Better two properties at £100,000 each that you can rent easily than one at £200,000 with no tenant because the rental income you can ask for isn't automatically twice as much because the property cost twice as much. I live near Edinburgh but the rental you can get an a flat in Edinburgh isn't that much different from what you can get on a flat in the outskirts. People bought property and rented them it for less than the mortgage because property always goes up right! They expected to make on the capital appreciation. Teach them to be so greedy and push house prices up to ridiculous levels.
london is pretty bad.. The south east of england is where house prices rocketed the rest of the country there was a lot less speculation. It's all relative in other words.
If a flat bought last year to let out at £260,000 last year is now only worth £160,000 and on the market because the owner can't get a tenant then I have little sympathy for the seller. Investments go up as well as down-it's hardly a big surprise when they go down is it? He was speculating on a rising prioperty market and lost out- tough ****. Does bring it within reach of a first time buyer though.
Pretty much the same situation in the states. Here in California in the past few years there were idiots that bought homes to rent out and they rented them out with negative cash flow, anticipating of course that the property values would continue upward. SURPRISE!!
It varies from area to area. There is a finite amount people can pay for rent so you can't just shove rent up willy nilly or you end up with no tenants a mortgage to pay on a falling property market.
It's like any other business venture if you use common sense and don't get greedy expecting massive returns you're OK. The bottom has fallen out the BTL market but the only ones in trouble are the speculative buyers that assumed prices would always go up. Better two properties at £100,000 each that you can rent easily than one at £200,000 with no tenant because the rental income you can ask for isn't automatically twice as much because the property cost twice as much. I live near Edinburgh but the rental you can get an a flat in Edinburgh isn't that much different from what you can get on a flat in the outskirts. People bought property and rented them it for less than the mortgage because property always goes up right! They expected to make on the capital appreciation. Teach them to be so greedy and push house prices up to ridiculous levels.
london is pretty bad.. The south east of england is where house prices rocketed the rest of the country there was a lot less speculation. It's all relative in other words.
If a flat bought last year to let out at £260,000 last year is now only worth £160,000 and on the market because the owner can't get a tenant then I have little sympathy for the seller. Investments go up as well as down-it's hardly a big surprise when they go down is it? He was speculating on a rising prioperty market and lost out- tough ****. Does bring it within reach of a first time buyer though.
Pretty much the same situation in the states. Here in California in the past few years there were idiots that bought homes to rent out and they rented them out with negative cash flow, anticipating of course that the property values would continue upward. SURPRISE!!
What is Excessive Profit?
gmc;1014241 wrote: Net return on food retailing is less than 10%-the big supermarkets live on turnover and screwing their suppliers to the floor. Small food retailers just can't compete. Non food net return 25-35%.
I would consider 35% return on investment to be excessive profit - to me, prices charged should relate to costs incurred not to what the market will pay.
I would consider 35% return on investment to be excessive profit - to me, prices charged should relate to costs incurred not to what the market will pay.
What is Excessive Profit?
Bryn Mawr;1017979 wrote: I would consider 35% return on investment to be excessive profit - to me, prices charged should relate to costs incurred not to what the market will pay.
I take it you don't run your own business then. Controlling prices doesn't work all it does is prop up unprofitable businesses, businesses need profit to re-invest and keep developing from a joiner getting a new van and tools to a shopkeeper renewing his shelving and computer system.
It's all these little and big businesses that pay the wages of the teachers, civil servants, bin men etc etc local and national government don't generate wealth-they have nothing to spend without successful businesses and those they employ to tax. They may put money in to the economy but where does it come from in the first place?
There is however a line to be drawn. It is not good capitalism to allow monopolies and cartels to develop nor do you want businesses using their influence to get mercantilist legislation passed
I take it you don't run your own business then. Controlling prices doesn't work all it does is prop up unprofitable businesses, businesses need profit to re-invest and keep developing from a joiner getting a new van and tools to a shopkeeper renewing his shelving and computer system.
It's all these little and big businesses that pay the wages of the teachers, civil servants, bin men etc etc local and national government don't generate wealth-they have nothing to spend without successful businesses and those they employ to tax. They may put money in to the economy but where does it come from in the first place?
There is however a line to be drawn. It is not good capitalism to allow monopolies and cartels to develop nor do you want businesses using their influence to get mercantilist legislation passed
What is Excessive Profit?
British gas profits £571mil
Price increase to consumer 22% = Excessive
Price increase to consumer 22% = Excessive
What is Excessive Profit?
abbey;1018209 wrote: British gas profits £571mil
Price increase to consumer 22% = Excessive
There are measures that can be taken to tax excessive profits and precedent to justify it. All it takes is the will to do it. We don't have real competition in our energy supplies. In the eighties when Thatcher was shutting down the coal mines and shifting power generation north sea gas there were plenty of people pointing out it was short sighted, that we should develop clean coal technology and that twenty years from now we would be dependent on foreign suppliers for our energy and basically at their mercy. We are now living twenty years later. we actually import coal now and guess what, no north sea gas and we are dependent on gas from russia.
Thatcher took the revenues from north sea oil and instead of investing in our industry and infrastructure (remember her phrase britain can succeed as a service economy) she gave tax cuts to people that didn't need them and started the bonanza the consequences of which we are now facing.
Don't get me wrong some things she did I agree with-like breaking the power of the unions-but extremes in politics in economics and social reform are a bad thing. Biggest problem we have in this country is we have an election system that get people in power who do not truly reflect the way people are voting, we swing from one extreme to the other and end up with dickheads like Blair and his acolyte Brown. All of what is happening could have been prevented all it would take is getting away from this trust the money men mantra we have allowed to go too far and politicians that didn't understand what was happening.
There have been plenty of warning signs and actual warnings given about this.
Price increase to consumer 22% = Excessive
There are measures that can be taken to tax excessive profits and precedent to justify it. All it takes is the will to do it. We don't have real competition in our energy supplies. In the eighties when Thatcher was shutting down the coal mines and shifting power generation north sea gas there were plenty of people pointing out it was short sighted, that we should develop clean coal technology and that twenty years from now we would be dependent on foreign suppliers for our energy and basically at their mercy. We are now living twenty years later. we actually import coal now and guess what, no north sea gas and we are dependent on gas from russia.
Thatcher took the revenues from north sea oil and instead of investing in our industry and infrastructure (remember her phrase britain can succeed as a service economy) she gave tax cuts to people that didn't need them and started the bonanza the consequences of which we are now facing.
Don't get me wrong some things she did I agree with-like breaking the power of the unions-but extremes in politics in economics and social reform are a bad thing. Biggest problem we have in this country is we have an election system that get people in power who do not truly reflect the way people are voting, we swing from one extreme to the other and end up with dickheads like Blair and his acolyte Brown. All of what is happening could have been prevented all it would take is getting away from this trust the money men mantra we have allowed to go too far and politicians that didn't understand what was happening.
There have been plenty of warning signs and actual warnings given about this.
What is Excessive Profit?
I think this question goes to the heart of the problem of Anglo Saxon capitalism under its present incarnation of extreme laissre faire market control of the economy. The problem with the business model is that everything is being driven by an extremely short term profit motive, where its become more important for companies to post massive short term profits, thereby attracting equity investors, and out performing more conservative companies that prefer to make smaller profits but over the longer term.
These are the "unsexy" companies that invest in the long term future, which is precisely what the big financial companies haven't been doing lately, they have simply been trying to keep their share prices as high as possible over this stupid 3-month profit cycle, while undermining their own business models, their long term stability, and ultimately the long-term stability and prosperity of society in general.
This is nuts, and somehow a more ration long term approach to the whole running of our economices needs to be devleoped. I am not sure what the mechanisms should be, but its imperative that it be done before our ability to have a self-sustaining productive economy dissapears.
These are the "unsexy" companies that invest in the long term future, which is precisely what the big financial companies haven't been doing lately, they have simply been trying to keep their share prices as high as possible over this stupid 3-month profit cycle, while undermining their own business models, their long term stability, and ultimately the long-term stability and prosperity of society in general.
This is nuts, and somehow a more ration long term approach to the whole running of our economices needs to be devleoped. I am not sure what the mechanisms should be, but its imperative that it be done before our ability to have a self-sustaining productive economy dissapears.
"We are never so happy, never so unhappy, as we imagine"
Le Rochefoucauld.
"A smack in the face settles all arguments, then you can move on kid."
My dad 1986.
Le Rochefoucauld.
"A smack in the face settles all arguments, then you can move on kid."
My dad 1986.
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Accountable
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What is Excessive Profit?
Galbally;1018268 wrote: I think this question goes to the heart of the problem of Anglo Saxon capitalism under its present incarnation of extreme laissre faire market control of the economy. The problem with the business model is that everything is being driven by an extremely short term profit motive, where its become more important for companies to post massive short term profits, thereby attracting equity investors, and out performing more conservative companies that prefer to make smaller profits but over the longer term.
These are the "unsexy" companies that invest in the long term future, which is precisely what the big financial companies haven't been doing lately, they have simply been trying to keep their share prices as high as possible over this stupid 3-month profit cycle, while undermining their own business models, their long term stability, and ultimately the long-term stability and prosperity of society in general.
This is nuts, and somehow a more ration long term approach to the whole running of our economices needs to be devleoped. I am not sure what the mechanisms should be, but its imperative that it be done before our ability to have a self-sustaining productive economy dissapears.
I agree that we all need to look more long-term - in business, politics, and life in gereral. But why are you still saying gov't is laissez faire?? They drove us off this cliff by trying to manipulate the markets.
These are the "unsexy" companies that invest in the long term future, which is precisely what the big financial companies haven't been doing lately, they have simply been trying to keep their share prices as high as possible over this stupid 3-month profit cycle, while undermining their own business models, their long term stability, and ultimately the long-term stability and prosperity of society in general.
This is nuts, and somehow a more ration long term approach to the whole running of our economices needs to be devleoped. I am not sure what the mechanisms should be, but its imperative that it be done before our ability to have a self-sustaining productive economy dissapears.
I agree that we all need to look more long-term - in business, politics, and life in gereral. But why are you still saying gov't is laissez faire?? They drove us off this cliff by trying to manipulate the markets.
What is Excessive Profit?
posted by galbally
I think this question goes to the heart of the problem of Anglo Saxon capitalism under its present incarnation of extreme laissre faire market control of the economy. The problem with the business model is that everything is being driven by an extremely short term profit motive, where its become more important for companies to post massive short term profits, thereby attracting equity investors, and out performing more conservative companies that prefer to make smaller profits but over the longer term.
as a fellow scot-indeed a fellow fifer i think I object to the term anglo saxon capitalism. unless of course you are making reference to the fact that the anglo saxons took a perfectly good idea thought of by celts and completely screwed it up:sneaky:
posted by accountable
I agree that we all need to look more long-term - in business, politics, and life in gereral. But why are you still saying gov't is laissez faire?? They drove us off this cliff by trying to manipulate the markets.
On a purely pedantic level you are right and I would agree with you but laissez-faire economics has come to mean that even allowing the markets to correct itself is interference and govt should act to keep the market growing. Much the same way as liberal economics is somehow associated with pure socialism in the american psyche. You've lost the language of dissent and discussion.
I think this question goes to the heart of the problem of Anglo Saxon capitalism under its present incarnation of extreme laissre faire market control of the economy. The problem with the business model is that everything is being driven by an extremely short term profit motive, where its become more important for companies to post massive short term profits, thereby attracting equity investors, and out performing more conservative companies that prefer to make smaller profits but over the longer term.
as a fellow scot-indeed a fellow fifer i think I object to the term anglo saxon capitalism. unless of course you are making reference to the fact that the anglo saxons took a perfectly good idea thought of by celts and completely screwed it up:sneaky:
posted by accountable
I agree that we all need to look more long-term - in business, politics, and life in gereral. But why are you still saying gov't is laissez faire?? They drove us off this cliff by trying to manipulate the markets.
On a purely pedantic level you are right and I would agree with you but laissez-faire economics has come to mean that even allowing the markets to correct itself is interference and govt should act to keep the market growing. Much the same way as liberal economics is somehow associated with pure socialism in the american psyche. You've lost the language of dissent and discussion.
What is Excessive Profit?
gmc;1018195 wrote: I take it you don't run your own business then. Controlling prices doesn't work all it does is prop up unprofitable businesses, businesses need profit to re-invest and keep developing from a joiner getting a new van and tools to a shopkeeper renewing his shelving and computer system.
It's all these little and big businesses that pay the wages of the teachers, civil servants, bin men etc etc local and national government don't generate wealth-they have nothing to spend without successful businesses and those they employ to tax. They may put money in to the economy but where does it come from in the first place?
There is however a line to be drawn. It is not good capitalism to allow monopolies and cartels to develop nor do you want businesses using their influence to get mercantilist legislation passed
Yes, I ran my own company for nigh twenty years and yes, I did charge market rates rather than cost plus - you work within the system you're a part of. That does not stop me deploring the culture that prices that way.
It has always been my way to charge companies market rates and people cost plus.
It's all these little and big businesses that pay the wages of the teachers, civil servants, bin men etc etc local and national government don't generate wealth-they have nothing to spend without successful businesses and those they employ to tax. They may put money in to the economy but where does it come from in the first place?
There is however a line to be drawn. It is not good capitalism to allow monopolies and cartels to develop nor do you want businesses using their influence to get mercantilist legislation passed
Yes, I ran my own company for nigh twenty years and yes, I did charge market rates rather than cost plus - you work within the system you're a part of. That does not stop me deploring the culture that prices that way.
It has always been my way to charge companies market rates and people cost plus.