| Monday, February 20, 2006 |
| Profit versus Profit Margin |
Inspired by talk radio, today I begin a series that I will call "Liberty 101". Using my skill as the son of two teachers, I will educate my faithful readers who in turn will repeat this at the dinner table tonight.
For no reason in particular (other than it has come up several times at work), I will begin with the difference between "profit" and "profit margin".
There has been much ado about ExxonMobil's record 2005 profits -- in particular, its fourth-quarter profits. ExxonMobil reported fourth-quarter profits of $10.7 billion, up 27% over the same quarter in 2004. It's a company record and one of the largest quarterly profits in US history. In 2005, ExxonMobil reported profits of $36.1 billion.
Those sound like huge numbers especially since we're paying $2.17 per gallon of gasoline. Even some of our legislators are outraged at this obscene profit and are calling for a windfall profits tax.
But what's important in a financially competitive economy is not profit, but profit margin. In 2005, the oil and natural gas industry earned a profit margin comparable to the national average. For every dollar of sales, the oil and natural gas industry earned 8.2 cents on average. The national average of all major US industries was 6.8 cents to the dollar. Many industries had larger profit margin than the oil industry -- both banks and pharmaceutical & biotechnology industries earned 18 cents to the dollar. "Every day, the world consumes over 80 million barrels of oil," according to an ExxonMobil press release. "That's about 40,000 gallons every second. With volumes such as these, our revenues are understandably great."
In the first three quarters of 2005, ExxonMobil incurred $229 billion in expenses. That's more than the Federal Government paid in Medicare costs nationwide during the same period.
Now, the outrage shouldn't be about the huge numbers, but about this: In 2004, ExxonMobil paid more in income taxes and other taxes in the United States than they earned here. Read that again ... slowly. Their total federal and state tax expense in 2004 was $11.8 billion, compared to earnings of $8.2 billion from their US operations.
Now, go and share with others.
Tomorrow, "Democracy" vs. "Republic" |
posted by Joe Napalm @ 8:09 PM   |
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| 3 Comments: |
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This is very interesting Joe, thanks for the lesson, it is much appreciated.
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When is the next shipment of tea? I have my costume! I am ready!
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I laugh to think about Alpha and his clown buddies dumping crude oil into the Boston Harbor...
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This is very interesting Joe, thanks for the lesson, it is much appreciated.