At 16:19 8-11-01 -0500, Gautam Mukunda wrote: >Maybe they are, but that depends on how they define "losing money". > >IMO, you "lose money" when your expenses exceeds your income. The business >world however seems to look at it differently. If a company makes $100 >million in profits in year #1, and makes another $90 million in profits in >year #2, they do not claim they "earned 90 million in profits" in year #2, >but made a $10 million loss. > >Jeroen > >Umm, Jeroen, do you have any accounting background?
Well, let's see. I graduated from Business School in 1989 with specialisation in Business Accounting. I have had various jobs in the Accounting Departments of several companies between 1989 and 2000. Yeah, I would say that qualifies as "any accounting background". >While the actual >accounting of profit and loss can, in fact, become fairly complicated, the >situation that you have described doesn't correspond with any version of >accounting of which I am aware. Baseline budgeting, which is, I think, >what you are getting confused about, isn't used to calculate profit and >loss. What I described is the common practice of (especially the larger) corporations over here, especially in times when the economy is going downhill. During such times, companies see their annual profits drop, and want to lay off staff. When they want to do that, they will have to justify it to the government and the labor unions. Keep in mind that laying off people is much harder here (thanks to the labor unions) than it is in the US. If a company wants to justify firings by saying they made a healthy 90 million in profits, it will be very difficult for them to fire people. Saying that you made a 10 million net loss makes it all much easier to justify laying off staff. Of course, the labor unions are well aware of this trick, so companies do not get away with it without at least providing a decent social plan for their future ex-employees. It has even become much harder for companies now that the public is getting more and more aware of the ridiculous pay raises the upper management gives itself (up to 45-50%!), even when at the same time they say people will have to be fired. After all, if things are going so bad for your company, how can you afford (and justify) giving the already highly-paid upper echelon a 40% raise? Jeroen _________________________________________________________________________ Wonderful World of Brin-L Website: http://go.to/brin-l Tom's Photo Gallery: http://www.tom.vanbaardwijk.com
