Explain Like I'm Five

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What does it actually mean when they say "record profits?" (self.explainlikeimfive)

submitted 1 year ago by AyyShook to c/explainlikeimfive

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Obviously people are being price gouged, but just saying "record profits" without really being able to explain it feels like I'm just repeating what I've heard people say and not speaking on an informed level. What does it actually mean? Like before or after production and transportation costs? Before or after taxes? Raw product yeild? Something else?

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[–] whatwhatwhatwhat 18 points 1 year ago (2 children)

Profit refers to the money you have left over after you pay all of your operating expenses. These expenses would include employee salaries, inventory cost, rent, transportation, everything it takes to run your business.

So, record profit would mean that the company in question made more money than they ever had before.

[–] [email protected] 8 points 1 year ago

Which means it doesn't hurt to look at executive pay on top of historical profits, as those are counted as operating costs as well.

IIRC the ratio between highest and lowest earners within a company has skyrocketed from about 25:1 to over 3000:1 in the past 75 years or so...

[–] [email protected] 2 points 1 year ago* (last edited 1 year ago)

Even that's subject to a little fuckery, though. In absolute terms? Relative to valuation? Relative to the wider market? I imagine an actual analyst would be looking at the calculation used.