Re: Instead of focusing on revenues imbalance,
- From: Les Cargill <lNOcargill@xxxxxxxxxxx>
- Date: Thu, 08 Dec 2005 03:47:33 GMT
Brablo wrote:
why not focus on the *earnings/profit* imbalance?
Suppose that China has sold us $1B worth of low-margin goods such as socks, plastic toys, and t-shirts. On average, let's say that the profit margins on these goods are 5%.
On the other hand, we sold them $0.7B worth of steam turbines, management consulting services, software, and other high margin goods/services. On average, let's assume that the profit margins on these goods/services are 25%.
The trade imbalance is $0.3B in China's favor. NOTE: This does *NOT* (IMHO) represent how much more money they have after executing these transactions, because the bulk of this money is going back to recover costs.
But the earnings imbalance indicate that the USA has $0.175B VS.
China's $0.050B. This means that the USA has $0.125B more free cash
than China.
Am I missing something here?
Nope. That's the whole story.
-- Les Cargill .
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