Down with the evil Gas lords III: Kaak's Redemption

[Kidlicious]

Originally posted by Flubber
Well then you are either wordsmithing or being irrelevant. Why would anyone WANT 10 bucks more profit if you have to invest an additional million to get it.

Gee I don't know because they would be 10 bucks richer.

[Arrian]

$1million invested to make $10? It's absurd. No, you'd invest your $1million elsewhere and make more.

-Arrian

[GhengisFarbâ„¢]

Woohoo! I can't wait until I'm a millionaire and can make 10 bucks a year off it.

Where do I sign up for Kidicious Investments?!

/sarcasm

[Kidlicious]

You guys are twisting what I'm saying. If you can make more profit somewhere else of course you should do that. But as a manager your objective is to maximize profits, because that maximizes shareholder value.

[Flubber]

Originally posted by Kidicious

It's profit divided by book value of assets.

Kid don't be dense-- all I am trying to get you to admit is that ROR is the key measure of profitability. I took Econ 101 and don't need you quoting the definitions at me.


besides your "book definition" works for a company wide ROR but isn't how it looks for a prospective project. For new projects perhaps to be more correct I should call it an ROI since I didn't realize I was talking at a terminology freak . I'm shocked I would have to make this differntion to an ECON grad since obviously a potential project has NO ASSETS and we HAVE to be talking about potential investment-- After all thats what a new project is.

So please look above at my examples as if I always said ROI throughout.

[Arrian]

And you maximize profits by (among other things) making intelligent investment decisions.

-Arrian

[Flubber]

Originally posted by Arrian


$1million invested to make $10? It's absurd. No, you'd invest your $1million elsewhere and make more.

-Arrian

Exactly . Exactly . Exactly

[Arrian]

If you knew what you were doing, anyway. If you were, say, GM... well, all bets are off.

-Arrian

[GhengisFarbâ„¢]

Originally posted by Kidicious
You guys are twisting what I'm saying. If you can make more profit somewhere else of course you should do that. But as a manager your objective is to maximize profits, because that maximizes shareholder value.

And how are you going to KNOW you can make more profit somewhere else?

You say Total Profit is the ultimate goal. I could see that if you never planned on investing in anything ever again. Total Profit is the result of the entire investment process. But you DON'T make decisions on it.

Projected Return on Investment is the what you use to determine where to allocate your money. As soon as the project is over you reinvest the money into the available projects with the highest projected RoI.

[Flubber]

Originally posted by Kidicious
You guys are twisting what I'm saying. If you can make more profit somewhere else of course you should do that. But as a manager your objective is to maximize profits, because that maximizes shareholder value.

and the measure that everyone looks at to see how well a manager does that is the ones with little acronyms like . . . everyone . . . lets say it together . . . ROR/ROI

[Kidlicious]

Originally posted by Flubber


Kid don't be dense-- all I am trying to get you to admit is that ROR is the key measure of profitability. I took Econ 101 and don't need you quoting the definitions at me.

Honestly it is not. I've just finished getting my business degree. It's important to finance majors I know. But net profit, cash flows and even net worth are much more important.

[GhengisFarbâ„¢]

Originally posted by Arrian
If you knew what you were doing, anyway. If you were, say, GM... well, all bets are off.

-Arrian

You got that right.

[Arrian]

This is hilarious. We have someone who works in the industry flat-out telling someone who doesn't how it works, and being told "honestly, no it's not."



Long live the Gas Lord threads!

-Arrian

[Kidlicious]

Originally posted by GhengisFarb

And how are you going to KNOW you can make more profit somewhere else?

You say Total Profit is the ultimate goal. I could see that if you never planned on investing in anything ever again. Total Profit is the result of the entire investment process. But you DON'T make decisions on it.

Projected Return on Investment is the what you use to determine where to allocate your money. As soon as the project is over you reinvest the money into the available projects with the highest projected RoI.

Ghengis,

In this context we are talking about building more refineries. The potential exists to reduce the margins for the existing refineries. I think that what matters is a comparison of (1) what the net income would be if the new refineries were not built and (2) what the new income would be if the new refineries were built. That's what matters, and that's why I'm saying we need to talk about what the net income would be and not the ROI

[GhengisFarbâ„¢]

Originally posted by Kidicious
But net profit, cash flows and even net worth are much more important.

Project 1
Has an investment of $1 million.
Has a net profit of $1000.


Project 2
Has an investment of $100.
Has a net profit of $750.

Kid is going follow his net profit nose and invest in Project 1. The rest of us are going to invest in Project 2 because we go by Return on Investment.