BruceP

Actually, to an accountant, profit and margin are two different things. Margin is one kind of profit, but when the word profit is used alone it is not generally interpreted to mean margin. It's just the delta between cost and revenue. I always have to be careful about this when dealing with my company's accountants... they're so ****.

So, strictly speaking, the "most profitable car company in the world" is probably Japanese because a company like Toyota would make the most money, the most "gross operating profit", ie what the shareholders get to put in their pocket. What we were debating is what car company has the biggest margins, which I think of as the difference between the cost of building and marketing the car and the price it sells for in the marketplace. I'm sorry if I wasn't precise about that.

Capital investment means something different thing again. "Profit" on capital investment is usually referred to as capital gains, where the word profit generally applies to what is earned on operating income. Capital investment, in fact, affects operating income as amortization. So, for example, building a factory is a "capital investment". GAAP and tax law both say that you can't write that all off in one year; you have to amortize it over several. So a portion of that investment is treated as an expense each year, and deducted from your operating income to produce a profit number. The cost of building the factory is never applied directly to sales. The factory sits on a balance sheet as an asset, and the amortization of it is annually added to the cost of doing business.

When a company is being evaluated for its profit potential or for its value such as in a sale or merger situation, however, things like amortization are taken out of the calculation, producing another kind of "profit" called EBITDA (earnings before interest, taxes, depreciation and amortization). In reality, when the big dogs are discussing profitability, it's EBITDA that gets their attention.

Asleep yet? I usually am by this time... or my head has exploded... and all the while, I'm paying these pri*cks $450 an hour...

Kevin H. in Atl..

WW has repeatedly referred to Porsche as "the most profitable automaker in the world".

Enterpret that anyway you wish, but he is clearly not stating that Porsche has larger revenues than all other automakers. Such a statement would clearly be just plain silly.

fast1

When a company is being evaluated for its profit potential or for its value such as in a sale or merger situation, however, things like amortization are taken out of the calculation, producing another kind of "profit" called EBITDA (earnings before interest, taxes, depreciation and amortization). In reality, when the big dogs are discussing profitability, it's EBITDA that gets their attention.

In the stock market you always hear about companies that show a nice earnings per share but in reality are losing money because of all of the accounting gimicks that are permitted. One infamous example is the old Lucent Technologies which showed hundreds of millions of dollars as earnings that they received from their pension investments. Couple that with the huge tax writeoffs that they received from the Fed, and their accountants were able to make an unprofitable company appear to be profitable. I'm to the point right now were the primary thing I want to know is a company's cash flow. How much did they have in the current qrt and how does that compare to prior qrts.

BruceP

You're right. A good valuator would ask that question for sure. I was thinking like a seller (I own an ad agency). We're all about the multiple, baby.

1999Porsche911

There is only one way to measure the performance of a company and that is: NET worth (with no consideration of stock value; if any). Do they have more money in their pocket today, and by how much more, than yesterday. As far as how the stock market values a company.....it is NOT based on fundamentals or any other concrete measurement but purely on speculation. The stock market is not about what IS, but what is expected.

BruceP

No argument about the stock market. You're spot on. My comments about value were those of someone who owns a private company that he might one day exit via private sale. I respectfully disagree, though, with your 'net worth' comment. A company's asset value could increase independent of its profit performance, I guess, but most of the time value is determined according to a company's ability to reliably generate cash. Even divorce lawyers look at company valuation that way, unless the company is going to be liquidated. 'Net worth' is a misnomer, here. Every company's balance sheet nets to zero, and tax law demands that every company empty the till every year (retained earnings aside, and even these must eventually be distributed as dividends). Anyway, that aside, there are countless companies out there with very little hard asset value that are still worth millions or billions. And that value comes from their ability to generate cash.

Anyhooo, Porsches are more fun than accounting.

1999Porsche911

The fact is, if net value does not increase, it does not matter if your cashflow increases 1000 fold, you are losing money. Net value talks ALL things into considerationand is a net of all assets and liabilities. There is not a more pure measurment of a company or individual's current financial position.

There is no way that a company, whose net value has declined can ever be considered to be growing. Asset value is not a measurement of net value. As far as the balance sheet netting to zero, look closely at what one of the 3 parts of a balance sheet calculation. That is where the gorwth or loss is made up.

But...we digress.

Steven C.

Hey hey hey...Can we talk about something that doesn't give me a headache How about OIL

VGM911

As I understand it, the claim of "most profitable" is the result of comparing Porsche's net profit per car to any other car manufacturer's net profit per car.

I agree with the post that Porsche's small size precludes it from achieving anywhere near what the large companies earn in total dollars.

MJBird993

Thanks Chris. Now maybe you understand my confusion - from what you wrote earlier it seemed that you had two engines in one car, or rather, I "assumed" that was the case.

And now we have OFFICIAL documentation that this has happened to a non-996 car!! Yes ladies and gentlmen, a 993 blew up!!! Oh mah gawd! This just blows all those other theories all to crap, doesn't it? Good thing it was posted on this board and not on the air-cooled forum. It might start to chip away at their feelings of superiority.

Michael

ZX9RCAM

Is it possible that in an effort to warm a car up in a cold climate that some of these indiviuals feel a need to start the car & take it to 5 grand & hold it there while sitting in the driveway.......

fast1

The fact is, if net value does not increase, it does not matter if your cashflow increases 1000 fold, you are losing money. Net value talks ALL things into considerationand is a net of all assets and liabilities. There is not a more pure measurment of a company or individual's current financial position.

As a former Engineer and a present Engineering Manager, accounting is not my game, but it seems to me that you are presenting an academic argument that would not apply to the majority of companies. Although I imagine that it's possible for a company to significantly increase cash flow and lose net value, I would expect that companies with robust cash flow and that offer goods and services in growing areas, would in the vast majority of cases increase their net value, provided of course that the cash flow is ongoing and not just a one time event.

The exceptions of course would be those companies that are engaged in businesses that are dieing. They could keep their costs down by force management reductions, and as the business dies quarter over quarter they could still generate a good cash flow.

Cisco to me is a good example of a company with a robust cash flow and of course an outstanding net value. Lucent would be a good example of a company with negative cash flow and of course a declining net value.

cdodkin

Both the '97 and the '99 were 986s, the '97 was bought and run in the UK, the '99 in the US.

Who mentioned a 993?

rleeq

It doesn’t get cold here. Nevertheless in my case I always let the car warm up before pushing the engine.

rleeq

I don’t know if Porsche is the “most Profitable” but I reminded PCNA is my response letter to their response/rejection letter where it was stated that they are “unable” to assist me with my engine failure that according to Porsche’s Annual Report 2005/06 their EBIT was $2,726,000,000 on sales of $9,397,000,000. That is a profit of 29%! Wow!!!