Tuesday, January 31, 2006
The Money Machine
Exxon Posts Record Profit: $10.7 billion for the 4th Q and $36.1 billion for the year. That' $3 billion per month. That's $100,000,000 per day. And that is profit.
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3 comments:
Before anyone gets too cranked up over this in either directon, keep in mind that the $10.7 billion in profit was on $371 billion in revenue. That's a gross margin of less than 3% -- hardly what I would call "obscene." Think of it this way: If you made a profit of $10,700 by selling $371,000 of, say, ice cream cones, would you feel guilty? Would you consider that to be outrageous? If not, then you need to ask yourself why we should feel differently about Exxon's profits.
As in all things, the absolute size of a number is rarely informative. The Exxon profits are obviously huge on an absolute scale, but the reason for that is that revenues are themselves so huge.
First off, Exxon made $36.1 billion for the year on revenue of $371 billion. Their net income margin was roughly 10%...their gross margins were much higher as they should be. In comparison, my company's (Bear Stearns) net income margin was 12% so anyone who just looks at total dollars should be given lesson in business.
People who understand business should get cranked up over these numbers and explain them rationallly to people
because the general public does not understand and will only see the headlines in the NY Post and alike and never actually read how Exxon compares to other companies.
This makes it easy for the not so brilliant (and mostly democratic) public officials to get the avgerage person to endorse the windfall taxes on a company like Exxon. How would you feel if you were a shareholder of Exxon?
the bottom line is that if we start to levy extra specail taxes on those companies that make a ton of money, we will prohibit growth, inovation and ulimately capitalism.
Jesse
Thanks for the correction Jesse. The $10.7B was the 4th quarter. The whole year was $36.1B. (You'd think coming up with a 3% margin would have tipped me off, but . . .).
As to the rest, I AM an Exxon shareholder and I am frustrated that the people who want to impose a windfall profits tax aren't running out and buying the stock instead. That way my share value would go up rather than being essentially flat for the last year.
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