2 ms·
You may be right, but percent of revenue is a terrible measure.
by BurningFrog 4y ago
You may be right, but percent of revenue is a terrible measure.
- AlbertCory 4y agoWhat do you think is better?
- BurningFrog 4y agoNot sure what the economists call it, but if a business spends $8M producing goods they sell for $10M, the money they can potentially spend on research is $2M, not $10M (the revenue).
- AlbertCory 4y agoI was going to answer this, but too many accounting questions: Is the $8M "cost of goods sold", i.e. variable costs, or does it include the fixed costs (buildings, salaries, utilities, etc.)
- BurningFrog 4y agoYeah, there is a lot of detail, and I don't have a perfect formula. My point was that OP equated revenue with profit, which is clearly and substantially wrong.
- AlbertCory 4y agoOP was me, wasn't it? I said "It's usually 1-2% of revenue."
- BurningFrog 4y agoOh, I didn't realize you're OP :) Yeah, I read that as "of all the money they could spend these greedy bastards only spend 1-2% on R&D", but in reality their "disposable income" is much less the revenue. Did I miss your point in some way?
- AlbertCory 4y agoI think you read "revenue" as "disposable income." R&D as a percent of revenue is a pretty common metric in the investment world. It's not perfect, like most accounting metrics. Maybe there are people who measure R&D as a percent of (revenue - COGS) but I haven't seen that.
- BurningFrog 4y agoThat's more than I know, but you're probably right. Perhaps one day I'll revolutionize accounting with my ideas, but for now I'll accept this :)