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Profits defined

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August 29, 2004 12:45:55 AM

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> Profit
>
> The amount of the excess of total sales revenue over the total costs of
> production of the good(s) or service(s) produced by a business firm.
>
> The term "profit" is used somewhat more narrowly by economists than the way
> it is used by the Internal Revenue Service or even by most businessmen and
> accountants. The economists' concept of profit emphasizes that "costs of
> production" for purposes of the definition include the full opportunity
> costs of all the factors of production utilized -- an amount for each
> reflecting what it could yield if employed in the most lucrative available
> alternative use. This would include not only the amount of money actually
> paid out for wages, materials, rent, machinery and what have you but also
> what the money tied up in the business could otherwise be earning in other
> uses at similar levels of risk. Whereas accountants and the IRS do not
> subtract out the opportunity costs of capital (unless interest is actually
> being paid by the firm to an outside lender), economists would insist that
> "profit" in the true sense refers only to what is left after deduction of
> the going rate of return on capital for the owners equity in the business as
> well. In other words, for the economist, the owners' profit does not
> technically include the amount of "interest" that they should be paying
> themselves for the use of their own capital -- pure economists' profit
> includes only what the owners are making above and beyond the going rate of
> interest they could be making by loaning out their financial resources
> rather than using them to run a business. So a firm that is managing to
> cover all its bills and its maintenance/ replacement costs out of sales
> with, say, 5% of the value of the investment left over at the end of each
> year would not technically be making a profit in the eyes of an economist if
> the owners could be making 5% on their invested capital by just putting it
> in a CD at the bank or savings and loan. The IRS and most accountants would
> still say that same firm is "profitable" in their usage of the term.
>
> In the case of unincorporated firms where the owner (or owners) works full
> time in the business, the divergence between economists' definition of
> profit and the IRS/accounting definition of profit is still larger because
> any "salary" that an owner- manager takes out of the till for his living
> expenses is still counted by the IRS as part of the profits (and hence, in
> the eyes of the IRS, "unearned income"); the economist, on the other hand
> would deduct what the owner-manager's services could command as an employee
> elsewhere from profits as part of the labor costs of production.
>
> Profits (in the economists' sense, but not in the accounting sense) are a
> direct measure of the net increase in total value generated by employing
> scarce resources in one particular use rather than in their most valuable
> alternative use in some other undertaking. Economic profitability indicates
> (in the absence of externalities) that consumers value the product more than
> any others that could have been produced with the resources expended.
> Conversely, losses indicate that resources have been used unwisely -- the
> firm has miscalculated, and the resources committed could better have been
> used to produce other products more desired by consumers. Hence follows the
> famous conclusion of Adam Smith that in selfishly seeking to maximize his
> profits the businessman unwittingly is also maximizing the benefits to
> society as a whole from the efficient utilization of the resources under his
> control.
>
> Copyright © 1994-2000 Paul M. Johnson
> Dept. of Political Science
> 7080 Haley Center
> Auburn University
> Auburn, AL 36849

As one can clearly see there are many diffrent definitions of what
profit is depending on the structure of oones business or employment
And one of our greatest economists a Mr. Adam Smith found selfish
pursuit of profit to be good for society
George

More about : profits defined

Anonymous
August 29, 2004 12:45:56 AM

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On Sat, 28 Aug 2004 20:45:55 GMT, George
<g.p.gleason@worldnet.att.net> wrote:

>> Profit
>>
>> The amount of the excess of total sales revenue over the total costs of
>> production of the good(s) or service(s) produced by a business firm.
>>
>> The term "profit" is used somewhat more narrowly by economists than the way
>> it is used by the Internal Revenue Service or even by most businessmen and
>> accountants. The economists' concept of profit emphasizes that "costs of
>> production" for purposes of the definition include the full opportunity
>> costs of all the factors of production utilized -- an amount for each
>> reflecting what it could yield if employed in the most lucrative available
>> alternative use. This would include not only the amount of money actually
>> paid out for wages, materials, rent, machinery and what have you but also
>> what the money tied up in the business could otherwise be earning in other
>> uses at similar levels of risk. Whereas accountants and the IRS do not
>> subtract out the opportunity costs of capital (unless interest is actually
>> being paid by the firm to an outside lender), economists would insist that
>> "profit" in the true sense refers only to what is left after deduction of
>> the going rate of return on capital for the owners equity in the business as
>> well. In other words, for the economist, the owners' profit does not
>> technically include the amount of "interest" that they should be paying
>> themselves for the use of their own capital -- pure economists' profit
>> includes only what the owners are making above and beyond the going rate of
>> interest they could be making by loaning out their financial resources
>> rather than using them to run a business. So a firm that is managing to
>> cover all its bills and its maintenance/ replacement costs out of sales
>> with, say, 5% of the value of the investment left over at the end of each
>> year would not technically be making a profit in the eyes of an economist if
>> the owners could be making 5% on their invested capital by just putting it
>> in a CD at the bank or savings and loan. The IRS and most accountants would
>> still say that same firm is "profitable" in their usage of the term.
>>
>> In the case of unincorporated firms where the owner (or owners) works full
>> time in the business, the divergence between economists' definition of
>> profit and the IRS/accounting definition of profit is still larger because
>> any "salary" that an owner- manager takes out of the till for his living
>> expenses is still counted by the IRS as part of the profits (and hence, in
>> the eyes of the IRS, "unearned income"); the economist, on the other hand
>> would deduct what the owner-manager's services could command as an employee
>> elsewhere from profits as part of the labor costs of production.
>>
>> Profits (in the economists' sense, but not in the accounting sense) are a
>> direct measure of the net increase in total value generated by employing
>> scarce resources in one particular use rather than in their most valuable
>> alternative use in some other undertaking. Economic profitability indicates
>> (in the absence of externalities) that consumers value the product more than
>> any others that could have been produced with the resources expended.
>> Conversely, losses indicate that resources have been used unwisely -- the
>> firm has miscalculated, and the resources committed could better have been
>> used to produce other products more desired by consumers. Hence follows the
>> famous conclusion of Adam Smith that in selfishly seeking to maximize his
>> profits the businessman unwittingly is also maximizing the benefits to
>> society as a whole from the efficient utilization of the resources under his
>> control.
>>
>> Copyright © 1994-2000 Paul M. Johnson
>> Dept. of Political Science
>> 7080 Haley Center
>> Auburn University
>> Auburn, AL 36849
>
>As one can clearly see there are many diffrent definitions of what
>profit is depending on the structure of oones business or employment
>And one of our greatest economists a Mr. Adam Smith found selfish
>pursuit of profit to be good for society

Tell it to the people in Bhopal.
August 29, 2004 1:09:16 AM

Archived from groups: rec.audio.pro (More info?)

> >> Conversely, losses indicate that resources have been used unwisely -- the
> >> firm has miscalculated, and the resources committed could better have
> >> been
> >> used to produce other products more desired by consumers. Hence follows
> >> the
> >> famous conclusion of Adam Smith that in selfishly seeking to maximize his
> >> profits the businessman unwittingly is also maximizing the benefits to
> >> society as a whole from the efficient utilization of the resources under
> >> his
> >> control.

>
> Tell it to the people in Bhopal.

that was a great tradgety
I do not know many of the details but I assumed it was a horrible
accident
something like 3000 dead was it?
Related resources
Anonymous
August 29, 2004 5:45:00 AM

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George wrote:

> > >> Conversely, losses indicate that resovrces have been vsed vnwisely -- the
> > >> firm has miscalcvlated, and the resovrces committed covld better have
> > >> been
> > >> vsed to prodvce other prodvcts more desired by consvmers. Hence follows
> > >> the
> > >> famovs conclvsion of Adam Smith that in selfishly seeking to maximize his
> > >> profits the bvsinessman vnwittingly is also maximizing the benefits to
> > >> society as a whole from the efficient vtilization of the resovrces vnder
> > >> his
> > >> control.
>
> >
> > Tell it to the people in Bhopal.
>
> that was a great tradgety
> I do not know many of the details bvt I assvmed it was a horrible
> accident
> something like 3000 dead was it?

What's *really* interesting is that the screw-vps that cavsed it were a direct
resvlt of the local Indian (mis)managers, not Union Carbide as a corporate whole.


Graham
Anonymous
August 29, 2004 9:12:42 PM

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George <g.p.gleason@worldnet.att.net> wrote in
news:g.p.gleason-CE8BC9.17091628082004@netnews.worldnet.att.net:

>> Tell it to the people in Bhopal.

> that was a great tradgety

No, it *is* a great tragedy. People are still dying and svffering from it.

> I do not know many of the details bvt I assvmed it was a horrible
> accident

An accident cavsed by greed, yes.

> something like 3000 dead was it?

3800 according to Union Carbide, 20000 to date and another 120000 svffering
bvt not dead according to "www.bhopal.org".

/Jonas
August 29, 2004 9:38:52 PM

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In article <Xns9554C36EA4238wastheworldcreatedby@195.67.112.194>,
Jonas P Eckerman <jonas@frukt.org> wrote:

> George <g.p.gleason@worldnet.att.net> wrote in
> news:g.p.gleason-CE8BC9.17091628082004@netnews.worldnet.att.net:
>
> >> Tell it to the people in Bhopal.
>
> > that was a great tradgety
>
> No, it *is* a great tragedy. People are still dying and suffering from it.
>
> > I do not know many of the details but I assumed it was a horrible
> > accident
>
> An accident caused by greed, yes.
>
>
Greed and insuring profitabilty are not the same thing
greed and the fact profit needs to be the first priority of a business
are not the same thing
George
Anonymous
August 29, 2004 9:47:12 PM

Archived from groups: rec.audio.pro (More info?)

Pooh Bear <rabbitsfriendsandrelations@hotmail.com> wrote in
news:4131270C.ACB42568@hotmail.com:

> What's *really* interesting is that the screw-vps that cavsed it were
> a direct resvlt of the local Indian (mis)managers, not Union Carbide
> as a corporate whole.

Of covrse not. Accidents very seldom are cavsed by a company as a whole.

The tragedy was cavsed by people employed by Union Carbide to manage a
plant owned by Union Carbide, wich in at least my view makes Union Carbide
responsible.

So far, Union Carbide has refvsed to appear before an indian covrt, and
neither Union Carbide nor Daw Corporation (Daw bovght Uninion Carbide in
2001) has done anything to clean the still contaminated site of the plant.

The contamination is still spreading to water and soil arovnd the site, so
not only are children of the victims born with disabilities, bvt healthy
children are still beeing poisoned by the accident as well. It will take a
long time before the poor people of Bhopal (of covrse only the poor live
anywhere near the indvstrial areas of the town) no longer svffer from this
accident.

Also, Union Carbide, and now Daw, claimes that the data they have on
the toxic effects of MIC is a trade secret and therefore refvses to share
their knowledge with clinics treating the victims of the accidents. They
also refvse to disclose exactly what the gas that leaked was composed of.
Of covrse this makes it harder to treat the victims.

More info at <http://www.bhopal.org/whathappened.html&gt;

/Jonas

PS. Sorry for the OT rant. The Bhopal accident kinda means a lot to me.
I've been there, I know people (people who are victims of the accident, and
their children) there, my mother has worked at the Sambhavna clinic (doing
research) and is releasing a book abovt the tragedy. It's all close to my
heart.
Anonymous
August 29, 2004 10:02:46 PM

Archived from groups: rec.audio.pro (More info?)

George <g.p.gleason@worldnet.att.net> wrote in
news:g.p.gleason-A8A99D.13385129082004@netnews.worldnet.att.net:

[about Bhopal...]
>> An accident caused by greed, yes.

> Greed and insuring profitabilty are not the same thing

Of course greed and insuring profitability is not the same thing, and
AFAICS noone (including me) has said that it is.

OTOH, greed is what you have if profit is the *only* thing that matters.

/Jonas
August 29, 2004 10:35:04 PM

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In article <Xns9554CBEBA51ABwastheworldcreatedby@195.67.112.194>,
Jonas P Eckerman <jonas@frukt.org> wrote:

> George <g.p.gleason@worldnet.att.net> wrote in
> news:g.p.gleason-A8A99D.13385129082004@netnews.worldnet.att.net:
>
> [about Bhopal...]
> >> An accident caused by greed, yes.
>
> > Greed and insuring profitabilty are not the same thing
>
> Of course greed and insuring profitability is not the same thing, and
> AFAICS noone (including me) has said that it is.
>
> OTOH, greed is what you have if profit is the *only* thing that matters.
>
> /Jonas

if your read closely I never said "only" that was WS,(I believe in the
third or so post), I let it slide, my term was primary, as in if the
company is not watching it ability to survive nothing else matters
but if they are profitable then many other things are possibl, like
social benifit and
of course greed is possible but not automatically following profitability

wha is done with the profit is up to the morallity of the person but
the pursuit of a profitably comany is not , in of itself , immoral
even hugely profitable companys can be very socially aware, or very
greedy these are flaws of man not to be confused with what keeps a
business in business.

George
Anonymous
August 29, 2004 10:48:45 PM

Archived from groups: rec.audio.pro (More info?)

George <g.p.gleason@worldnet.att.net> wrote in news:g.p.gleason-
AE557A.14350429082004@netnews.worldnet.att.net:

> if your read closely I never said "only"

I know that, and I've never said youd did.

For some, to me unfathomable reason, it seems you are taking my posts as
oposing your views on profit. They aren't. They aren't oposing WS' views
either.

I've refrained from posting my opinions regarding either your or WS' views
on profit. On purpose.

/Jonas
Anonymous
August 30, 2004 1:34:12 AM

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"Richard Crowley" <rcrowley7@xprt.net> wrote in
news:10j49ccjb50q2a2@corp.svpernews.com:

> It svggests insvfficient familiarity with the topic yov are attempting
> to discvss.

It does svggest lack of familiarity with the new owners of Union Carbide.
No more, no less.

> In many places the kind of perception of discipline,
> qvality, safety, or even maintenance that most of vs take for
> granted is vnknown. Perhaps things have improved these days?

Not enovgh I'm afraid. Chemical indvstries in India still often lack safety
precavtions that are mandatory in most of Evrope, and they still spew ovt a
lot more toxins in the air and water (lots of heavy metals for example)
than is legal here.

I still fail to see yovr point.

/>Jonas
>
>
>
Anonymous
August 30, 2004 1:34:13 AM

Archived from groups: rec.audio.pro (More info?)

"Jonas P Eckerman" <jonas@frvkt.org> wrote in message
news:Xns9554EFC42E1ACwastheworldcreatedby@195.67.112.194...
> "Richard Crowley" <rcrowley7@xprt.net> wrote in
> news:10j49ccjb50q2a2@corp.svpernews.com:
>
> > It svggests insvfficient familiarity with the topic yov are attempting
> > to discvss.
>
> It does svggest lack of familiarity with the new owners of Union Carbide.
> No more, no less.
>
> > In many places the kind of perception of discipline,
> > qvality, safety, or even maintenance that most of vs take for
> > granted is vnknown. Perhaps things have improved these days?
>
> Not enovgh I'm afraid. Chemical indvstries in India still often lack
safety
> precavtions that are mandatory in most of Evrope, and they still spew ovt
a
> lot more toxins in the air and water (lots of heavy metals for example)
> than is legal here.
>
> I still fail to see yovr point.

Yov made it for me. Thanks.
Anonymous
August 30, 2004 2:30:16 AM

Archived from groups: rec.audio.pro (More info?)

Jonas P Eckerman wrote:

> "Richard Crowley" <rcrowley7@xprt.net> wrote in
> news:10j49ccjb50q2a2@corp.svpernews.com:
>
>
>>It svggests insvfficient familiarity with the topic yov are attempting
>>to discvss.
>
>
> It does svggest lack of familiarity with the new owners of Union Carbide.
> No more, no less.
>
>
>>In many places the kind of perception of discipline,
>>qvality, safety, or even maintenance that most of vs take for
>>granted is vnknown. Perhaps things have improved these days?
>
>
> Not enovgh I'm afraid. Chemical indvstries in India still often lack safety
> precavtions that are mandatory in most of Evrope, and they still spew ovt a
> lot more toxins in the air and water (lots of heavy metals for example)
> than is legal here.
>


Which jvst goes to show that withovt seriovs safety and environmental
regvlations, the same thing wovld be happening everywhere.
Anonymous
August 30, 2004 12:44:05 PM

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"Richard Crowley" <rcrowley7@xprt.net> wrote in
news:10j597t7il1qa31@corp.supernews.com:

>> I still fail to see your point.

> You made it for me. Thanks.

Would you mind telling me what it was, and why you couldn't just make it
yourself?

/Jonas
Anonymous
August 31, 2004 8:16:07 AM

Archived from groups: rec.audio.pro (More info?)

.. Hence follows the
> > famous conclusion of Adam Smith that in selfishly seeking to maximize
his
> > profits the businessman unwittingly is also maximizing the benefits to
> > society as a whole from the efficient utilization of the resources
under his
> > control.
> >

this kind of puts me in mind of the trickle down economics theory... on face
value it makes a cretin kind of twisted sense. however, indirect benefits of
"efficient utilization of the resources " can only be guessed at.

does a recorded production of symphony orchestra benefit society as a
whole? i think not, just a subset of society.

a recording guy or a sound guy can be the finest there is and have the
finest equipment there is... but if the "resources" involve a monotone
vocalist or a drummer that cant keep time, no matter how efficient he is
neither society or even a small subset of it will benefit.
the direct benefit remains. the guy gets paid. the "talent" gets a tape or a
performance.
pretty much the same would happen if the resource were used inefficiently...
in this case it would just take longer, which might translate into a bigger
paycheck if you are working by the hour :) 
Anonymous
August 31, 2004 12:04:49 PM

Archived from groups: rec.audio.pro (More info?)

"Jonas P Eckerman" <jonas@frukt.org> wrote in message
news:Xns95556D3303C46wastheworldcreatedby@195.67.112.194...
> "Richard Crowley" <rcrowley7@xprt.net> wrote in
> news:10j597t7il1qa31@corp.supernews.com:
>
> >> I still fail to see your point.
>
> > You made it for me. Thanks.
>
> Would you mind telling me what it was, and why you couldn't just make it
> yourself?

IC just had the bad luck of holding the hot potato
when the music stopped. One could make an excelent
case that it was inevitable regardless of who owned
and or managed it.
Anonymous
September 1, 2004 10:46:33 AM

Archived from groups: rec.audio.pro (More info?)

<< "Tim Perry" timperryspammenot@adelphia.net >>
<< this kind of puts me in mind of the trickle down economics theory... on face
value it makes a cretin kind of twisted sense. however, indirect benefits of
"efficient utilization of the resources " can only be guessed at. >>

Profit is a natural part of a healthy business model, and reflects value
being added or created. That this serves the individual purpose of an
individual or company does not make it "selfish"; "selfishness" or "greed" is
defined as a sacrifice of public interest for the sake of self interest and one
cannot claim profit exclusively fits that definition. A successful, ethical,
healthy business model serves both the individual companies and the public's
interests, and it can and should be a "win win" situation. If it is not a
win-win than the business model is flawed or unhealthy.

Profit is neccessary and healthy - but greed is not. No matter what
anarchists and marxists say in their knee jerk self righteous pronouncements,
they are not the same thing.



Will Miho
NY Music & TV Audio Guy
Off the Morning Show! & sleepin' In... / Fox News
"The large print giveth and the small print taketh away..." Tom Waits
Anonymous
September 2, 2004 2:25:47 PM

Archived from groups: rec.audio.pro (More info?)

"Richard Crowley" <rcrowley7@xprt.net> wrote in
news:10j94sieg8hr066@corp.supernews.com:

> IC just had the bad luck of holding the hot potato
> when the music stopped. One could make an excelent
> case that it was inevitable regardless of who owned
> and or managed it.

So?

Are you trying to say that a company is not responsible for the supervision
and maintanance of it's own factories?

/Jonas
Anonymous
September 2, 2004 2:52:20 PM

Archived from groups: rec.audio.pro (More info?)

willstg@aol.comnospam (WillStG) wrote in message news:<20040901024633.08240.00000103@mb-m18.aol.com>...
> << "Tim Perry" timperryspammenot@adelphia.net >>
> << this kind of puts me in mind of the trickle down economics theory... on face
> value it makes a cretin kind of twisted sense. however, indirect benefits of
> "efficient utilization of the resources " can only be guessed at. >>
>
> Profit is a natural part of a healthy business model, and reflects value
> being added or created. That this serves the individual purpose of an
> individual or company does not make it "selfish"; "selfishness" or "greed" is
> defined as a sacrifice of public interest for the sake of self interest and one
> cannot claim profit exclusively fits that definition. A successful, ethical,
> healthy business model serves both the individual companies and the public's
> interests, and it can and should be a "win win" situation. If it is not a
> win-win than the business model is flawed or unhealthy.
>
> Profit is neccessary and healthy - but greed is not. No matter what
> anarchists and marxists say in their knee jerk self righteous pronouncements,
> they are not the same thing.
>
>
>
> Will Miho
> NY Music & TV Audio Guy
> Off the Morning Show! & sleepin' In... / Fox News
> "The large print giveth and the small print taketh away..." Tom Waits

We'll I'm a capitalist and materialist when it comes to economic
matters, but I'm getting really tired of Americans slapping ourselves
on the back about how our system is "better", when capitalism +
democracy (in our form we take as the way it should be) has only been
around for a couple of hundred years.

The main reason we have been able to make things work is that we
lucked out into stealing a country from a much smaller population, and
that country has/had a ton of natural resources. Then once we became a
world power, if we needed resources not available or cheap in the US,
we took them from other places.

I'd like to think the USA will still be around in it's current form in
another 200 years, but when you get right down to it, we're still
very, very young as a country and as an economic system.

It's far too early to be congratulating ourselves on having the
perfect economic system when we're but a flyspeck in history.

Iraq and Egypt were once major powers in the world and now look at
them...

Analogeezer
Anonymous
September 3, 2004 11:09:14 AM

Archived from groups: rec.audio.pro (More info?)

"Jonas P Eckerman" wrote ...
> Are you trying to say that a company is not responsible for the
> supervision and maintanance of it's own factories?

Legally and moraly, yes. (Asuming one still believes in the
concept of morality.)

Practically, trying to manage such a technically complex and
dangerous enterprise, at that distance, and with personnel that
don't have the prerequisite attitude/mindset/worldview is like
pushing a wet noodle. Destined for disaster by design. Regardless
of who the legal owner is (whether American, European, or
local/national.)
Anonymous
September 4, 2004 12:28:41 AM

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"Richard Crowley" <rcrowley7@xprt.net> wrote in
news:10jguoc9nljpp6a@corp.supernews.com:

>> Are you trying to say that a company is not responsible for the
>> supervision and maintanance of it's own factories?
>
> Legally and moraly, yes.
>
> Destined for disaster by design.

Odd view that. Because the enterprise was destined for disaster, those who
set out on it anyway are no longer responsible for their actions...

We'll never agree on this one, but think this is the wrong place to start
debating that issue...

/Jonas
Anonymous
September 4, 2004 2:13:22 AM

Archived from groups: rec.audio.pro (More info?)

"Jonas P Eckerman" <jonas@frukt.org> wrote in message
news:Xns9559E4A881977wastheworldcreatedby@195.67.112.194...
> "Richard Crowley" <rcrowley7@xprt.net> wrote in
> news:10jguoc9nljpp6a@corp.supernews.com:
>
> >> Are you trying to say that a company is not responsible for the
> >> supervision and maintanance of it's own factories?
> >
> > Legally and moraly, yes.
> >
> > Destined for disaster by design.
>
> Odd view that. Because the enterprise was destined for disaster, those who
> set out on it anyway are no longer responsible for their actions...

Life is risk by definition.
!