Re: [BaadAssGremlins] Impossible to make 300 % profit- Wrong!--Onree ranting on.......

[Onree <onree@xxxx>]

on 9/1/04 3:59 PM, John W Rosa at JohnRosa@xxxx did write:

> Onree-
> 
> What you are saying is that your investment is 25% of the
> sale price, while profit was 75% of the sale price......but
> you made a 300% profit on your original investment.

John,
This is what an accountant calls "return on investment" and is looks forward
from the starting point. It measures your increase as it relates to what you
started with. So if you start out with $50 on Jan 1 and end up with $200 on
Dec 31 you have had a 300% return on your investment.

> If I buy something for $10 and sell it for $15, that's a 50%
> profit, as the $5 profit is 50% of the original price. Thus,
> $20 would be a 100% profit,
"Profit" starts with the end as the point of reference, takes what you end
up with, and looks backward. Let's say that I had just opened my business
with a $10 loan from my friendly banker. I have $20 dollars in my pocket
from the sale. I take away the $10 (to pay back the banker), and I have $10
left in my pocket. $10 is 50% of the $20 that I had in my pocket before I
took out my cost, and paid the bank. If the $20 was really 100% profit it
would be all mine, to spend however I wanted, like for rear bumper endpieces
for my 1981 Eagle sx/4--anybody got any???


So, let's say on Jan 1st, I go to my friend who has been hoarding NOS 1971
Gremlin grilles since 1971, and has so many he doesn't know what to do with
them. I buy one from him for $100 and sell it on ebay for $200. The next
week I stick the $100 profit in my glovebox, and use the remainder to buy
another grille for $100, and again sell it on ebay for $200. I do that every
week for a year, and at the end have $5200 in my glovebox. That is a 5200%
return on my original investment, but still only a 50% profit on each
individual transaction.

I used to teach this stuff, and it is a hard idea to get across. It is a
convention that accountants and bookkeepers use so that everyone is using
the same words in the same way. One of my college profs used to say that
profit was like purity, and a substance could not be more than 100% pure.
The old Ivory bar soap ads used to say "ninety-nine and forty-four,
one-hundreths percent pure. It floats." SO, if you buy one 1971 Gremlin
grille for fifty-six cents and sell it for $100 you have a 17,857% markup, a
17,857% return on your investment, but still "only" a 99.44% profit.

Sorry if this is a rant. I'm gonna go out, have a beer, and look for that
warehouse full of 1971 Gremlin grilles.

Onree
> 
> 
> John
> 
> -----Original Message-----
> From: Onree [mailto:onree@xxxx]
> Sent: Wednesday, September 01, 2004 1:14 PM
> To: BaadAssGremlins@xxxxxxxxxxxxxxx
> Subject: Re: [BaadAssGremlins] Impossible to make 300 % profit
> 
> 
> 
> It is not possible to make 300 % profit. Profit can never exceed 100% and
> profit percentage is defined as markup divided by selling price. Thus, if I
> buy a carburetor for $10 and mark it up by $30 to sell it for $40, I have
> made a profit of 75%. If I sell it for $20, I make a profit of only 50%.
> 
> The only way to even make 100% profit is if something costs you nothing. If
> I find a carburetor lying in the street, and sell it for $20, or $40, or
> $66, or $2955, my profit percentage is the same, 100% because the selling
> price, whatever it may be, is all markup.
> 
> It is sure possible to have a 300% markup, but that is not the same as 300%
> profit.
> 
> Onree
> 
>> on 9/1/04 5:39 AM, AMC74HORNET@xxxx at AMC74HORNET@xxxx did
> write:
> 
>> He probably got these parts for next to
>> nothing and is trying to make 300% profit.
>> "Doc"
>> 
>> 
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