###General Discussion Thread
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Let's say you start with Net $0:
Buy car: $0 - $200,000 = -$200,000
Sell car: -$200,000 + $220,000 = $20,000
Buy car: $20,000 - $230,000 = -$210,000
Sell car: -$210,000 + $250,000 = $40,000
You are correct, you end up with $40,000 net profit.
What is the situation in which you'd look at gross over net? It feels to me like you'd always want to factor in the costs of running your operation but I'm sure there's something I'm not thinking of.
The gross margin (gross profit / revenue) is an important KPI to keep track on your pricing policy.
It also depends highly on the industry you‘re on. Retail and Wholesale for example, for which the COGS are the biggest cost factor look heavily on their gross margins.
Also keep in mind that net profits can be heavily influenced by one time events that don’t reflect the actual business situation. High depreciations and amortizations for example.
Obviously you wouldn’t
40k
Spent a total of 430k
Sold for a total of 470k
The “sold for 220k, rebought for 230k” bit is what confuses people. The 10k “lost” there just comes out of the $50k difference between the first buy price and the 2nd sale price.
Imagine the second buy and sell cycle as an entirely different item and it becomes clear.
Honestly though I don't know what people find so confusing about this. This is how basically every stock/currency/crypto trading works - you buy low, sell high. It doesn't matter what the absolute values are, just the difference between what you bought it for vs what you sold it for, aka the profit.
Half the people got this wrong?!
I mean, if people are struggling to find the correct answer to this they must have trouble functioning in society.
You buy a car and sell it for profit. Simply a question about difference. Find the difference.
You buy a car and sell it again. Same as before. Add the two numbers..
40k.
You had 200k in capital, bought the car and sold it. 20k profit. But then you bought it again, with the 220k from the sale and added 10k (210k capital accumulated) and sold for 250k. 250-210=40k of profit.
In the first transaction pair you earned 20k (sold sum minus bought sum).
In the second transaction pair you earned 20k.
20k + 20k = 40k earned in total.
Everything else is irrelevant. It's this simple.
This is just identical to the cow question but with a car instead of a cow and vastly higher numbers. The process is the same though. This is Simple Math. You've got money goin out, then in, then out, then in again.
The 220k paid for the 200k with 20k to spare, the 250k paid for the 230k with 20k to spare, 20k+20k = 40k. The fact that you sold it for a lower value and then bought it again for a higher one doesn't matter because those numbers are already accounted for elsewhere. The only thing that matters is how much it was sold for relative to how much it was bought for.
Here's one way to get the 30k answer. (Note: this is wrong.)
1. You bought the car for 200k
2. You sold it for 220k --> 20k profit (so far so good)
3. You bought it back for 230k, so you lost 10k of that profit by paying 10k more for the car than you sold it for. --> 20k -10k = 10k profit so far.
4. You sold it for 250k --> another 20k profit plus the 10k you already made.
Step 3, obviously, is the problem. You didn't actually *lose* the 10k in that step, you simply lost out on an extra 10k you *could* have made by keeping the car until you sold it for 250k. If you'd bought the car at 200k and sold it at 250k, you'd have made 50k. But by selling it at 220k and buying it back at 230k, you lost out on 10k of that rise in value. Which leaves you with 40k more (50k - 10k) than at the start. Math checks out.
You can just change the item to make it easier in your head
I bought a bar of silver for £200k and sold it for £220k - banked £20k profit
I bought a bar of gold for £230k and sold it for £250k - banked £20k profit
###General Discussion Thread --- This is a [Request] post. If you would like to submit a comment that does not either attempt to answer the question, ask for clarification, or explain why it would be infeasible to answer, you *must* post your comment as a reply to this one. Top level (directly replying to the OP) comments that do not do one of those things will be removed. --- *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/theydidthemath) if you have any questions or concerns.*
Let's say you start with Net $0: Buy car: $0 - $200,000 = -$200,000 Sell car: -$200,000 + $220,000 = $20,000 Buy car: $20,000 - $230,000 = -$210,000 Sell car: -$210,000 + $250,000 = $40,000 You are correct, you end up with $40,000 net profit.
Gross profit. That wouldn’t be net.
☝️🤓
What is gross and net profit? What’s the difference?
Gross profit is revenue minus cost of goods sold. Net profit is gross profit minus expenses, depreciation and amortization, interest and taxes.
Thanks
What is the situation in which you'd look at gross over net? It feels to me like you'd always want to factor in the costs of running your operation but I'm sure there's something I'm not thinking of.
The gross margin (gross profit / revenue) is an important KPI to keep track on your pricing policy. It also depends highly on the industry you‘re on. Retail and Wholesale for example, for which the COGS are the biggest cost factor look heavily on their gross margins. Also keep in mind that net profits can be heavily influenced by one time events that don’t reflect the actual business situation. High depreciations and amortizations for example. Obviously you wouldn’t
40k Spent a total of 430k Sold for a total of 470k The “sold for 220k, rebought for 230k” bit is what confuses people. The 10k “lost” there just comes out of the $50k difference between the first buy price and the 2nd sale price. Imagine the second buy and sell cycle as an entirely different item and it becomes clear.
Honestly though I don't know what people find so confusing about this. This is how basically every stock/currency/crypto trading works - you buy low, sell high. It doesn't matter what the absolute values are, just the difference between what you bought it for vs what you sold it for, aka the profit.
Half the people got this wrong?! I mean, if people are struggling to find the correct answer to this they must have trouble functioning in society. You buy a car and sell it for profit. Simply a question about difference. Find the difference. You buy a car and sell it again. Same as before. Add the two numbers..
40k. You had 200k in capital, bought the car and sold it. 20k profit. But then you bought it again, with the 220k from the sale and added 10k (210k capital accumulated) and sold for 250k. 250-210=40k of profit.
In the first transaction pair you earned 20k (sold sum minus bought sum). In the second transaction pair you earned 20k. 20k + 20k = 40k earned in total. Everything else is irrelevant. It's this simple.
This is the way I looked at it as well.
Came here to say this.
This is just identical to the cow question but with a car instead of a cow and vastly higher numbers. The process is the same though. This is Simple Math. You've got money goin out, then in, then out, then in again.
The 220k paid for the 200k with 20k to spare, the 250k paid for the 230k with 20k to spare, 20k+20k = 40k. The fact that you sold it for a lower value and then bought it again for a higher one doesn't matter because those numbers are already accounted for elsewhere. The only thing that matters is how much it was sold for relative to how much it was bought for.
Here's one way to get the 30k answer. (Note: this is wrong.) 1. You bought the car for 200k 2. You sold it for 220k --> 20k profit (so far so good) 3. You bought it back for 230k, so you lost 10k of that profit by paying 10k more for the car than you sold it for. --> 20k -10k = 10k profit so far. 4. You sold it for 250k --> another 20k profit plus the 10k you already made. Step 3, obviously, is the problem. You didn't actually *lose* the 10k in that step, you simply lost out on an extra 10k you *could* have made by keeping the car until you sold it for 250k. If you'd bought the car at 200k and sold it at 250k, you'd have made 50k. But by selling it at 220k and buying it back at 230k, you lost out on 10k of that rise in value. Which leaves you with 40k more (50k - 10k) than at the start. Math checks out.
You can just change the item to make it easier in your head I bought a bar of silver for £200k and sold it for £220k - banked £20k profit I bought a bar of gold for £230k and sold it for £250k - banked £20k profit
Isn't the answer wither 250k or 570k since it's "how much did I earn" not win? So the merchant in total earned 570k but invested most of it again