21–30 of 130 posts
I found the per calculation highly suspicious, especially the first row: > Country Median Margin Average Margin Sample Size > South Africa 28.86% 82.37% 7 How can the average be 82% with a median being 28% without having one that is above 100%?
I found the per calculation highly suspicious, especially the first row: > Country Median Margin Average Margin Sample Size > South Africa 28.86% 82.37% 7 How can the average be 82% with a median being 28% without having one that is above 100%?
It being a weighted average does sound like a reasonable explanation, though. A median of 0.29 and weighted mean of 0.82 is trivially possible given e.g. values (0.29, 0.29, 0.82) and weights (0, 0, 1).
Absent a true monopoly or government protection high margin businesses are usually those most ripe for disruption. Someone eventually comes along and, for various reasons, is willing to make far lower margin and then the battle begins. Lots of sleepy high margin businesses out there just waiting to get picked off by a new entrant.
I.e. a company could be “profitable” but also basically broke at the same time with no cash to pay people or suppliers.
“Your margin is my opportunity” Absent a true monopoly or government protection high margin businesses are usually those most ripe for disruption. Someone eventually comes along and, for various reasons, is willing to make far lower margin and then the battle begins. Lots of sleepy high margin businesses out there just waiting to get picked off by a new entrant.
“Your margin is my opportunity” Absent a true monopoly or government protection high margin businesses are usually those most ripe for disruption. Someone eventually comes along and, for various reasons, is willing to make far lower margin and then the battle begins. Lots of sleepy high margin businesses out there just waiting to get picked off by a new entrant.
It lowers the profit of a public company, thus decreasing pressures to pay a dividend, while the consultancy leeches money and pays it forward to some other company in which the public company’s founders/executives are direct beneficiaries.
> Divide a company's income by its revenue If I'm a person who believes income is the same thing as revenue, how would you explain this division to me in a way I'd understand? Or does "income" in this case mean "profit"?
Income is what you sit with after all the expenses and taxes have been deducted from the retail price.
Let's say you create some product, XYZ, which takes you exactly 5 hours to make. The materials to make the product costs you $50, the salary costs $100 ($20/hr * 5 hours), the shop costs (rent, utilities, etc.) costs roughly $5 pr product. And the things involved in selling your product (marketing, etc.) costs you $45 pr. product.
So in order to break even, you need to charge $50 + $100 + $5 + $45 = $200
You decide to sell the product for $250.
So before taxes you've earned $250 - $200 = $50
And let's say you have to pay 10% taxes on that, so 10% off $50 = $5
Your shop is left with $45 for each product they sell. Or you have $45 in income.
Your operating margins would be $45 / $250 = 18%
The margin on most items is 4% (some lower, some higher e.g. luxury items are 10%).
4% is not terrible in and of itself.
But then you factor in:
- advertising costs
- conversion rates on clicks from the above
- taxes
and you get a real appreciation for how hard it must be to run high volume/low margin businesses.
Sure, you can do organic marketing etc but then you are just trading time for dollars.
Good article although especially in tech it’s not so simple. Thanks to games with depreciation and other financial engineering a company may look “profitable” but still be quite unhealthy or at risk. One generally needs to look at “profit” in the context of cash flow. I.e. a company could be “profitable” but also basically broke at the same time with no cash to pay people or suppliers.
Op margins are a great way to think about where one might see mean reversion, which then flows to net.
Ie are there structural reasons for the op income or is it a maturing sector which will attract new entrants.
Earlier quoted context omitted.
I stumbled over this sentence in the same way. And drew the same conclusion: the author uses "income" to mean "profit"
That is the standard meaning of that term in business accounting. When you or I work for a salary, we think of income as all the money coming in, but that's because there are no allowable expenses that we get to deduct against that income, so our "revenue as employees" is all "income".