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Well, it's a 100% increase from that company, for one year. The next year, though, they only need to buy one lathe again. And the next year, and the year afte
by AnimalMuppet 3y ago
Well, it's a 100% increase from that company, for one year. The next year, though, they only need to buy one lathe again. And the next year, and the year after that. Every tenth year, they'll buy two lathes.
Calling that a 100% increase doesn't seem to make sense because it actually doesn't make sense.
- jacquesm 3y agoYes, and there even is such a thing as equipment lease for companies that are liquidity constrained to be able to move to match the market even if their short term reserves would stop them from doing so otherwise. At a price, of course. The most asked question about the CNC gear we sold was whether or not it could be leased and whether we could offer financing. Almost none of it was bought outright.
- HeyLaughingBoy 3y agoI realize that I'm late to this party, but I learned about the phenomenon of CapEx vs OpEx when the small company I worked for came under new ownership in the early 90's. We made relatively inexpensive light-industrial electronic controls and the new owner, a former CFO from a public utility, came up with the "brilliant" idea to allow customers to lease hardware from us vs buying it outright since they might have more money in their Operations budget as opposed to Capital. In theory, not a bad idea. In practice, the only business likely to want to lease a $200 item is probably close to bankruptcy.
- lmm 3y agoThe point is that it's an extreme bullwhip effect. Yes, it's not a sustained 100% increase, but it's a 100% increase that year.