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Comparing costs with revenues is right. Profit already accounts for costs, and can be razor thin in very large companies with lots of costs - a comparison of co
by barrkel 8y ago
Comparing costs with revenues is right. Profit already accounts for costs, and can be razor thin in very large companies with lots of costs - a comparison of costs with profit in such a company would be highly misleading.
- thedufer 8y agoI think you're right that comparing to profit isn't right, but I still contend that comparing to revenue isn't either. What I meant is looking at per-unit profit margins (i.e. excluding things like R&D) - if just producing whatever they're selling costs 99% of revenue generated from it, then 5% of revenue on R&D looks pretty high - they're drawing on capital to do so. If, on the other hand, those costs are only 5%, then they're stashing away an enormous portion of revenue despite R&D and thus they're R&D spend looks pretty low.