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Originally Posted by Binky Bainbridge  Just take Exxon, the world's largest oil company. It's turnover in 2006 was $405.55 Billion - bigger than the gross domestic product of Turkey, the world's 17th largest economy!
It declared record profits for that year of $40.6 Billion!!
I'm certainly not against the profit-motive, but there is something obscene about such profits in today's world when you read such about such things as below, in what is after all the largest & richest economy in the world - we haven't even got to third-world countries |
For instance, in 2004 Exxon Mobil earned more money -- $25.33 billion -- than any other company on the Fortune 500 list of largest corporations.
But by another measure of profitability, gross profit margin, it ranked No. 127.
Jay Taparia, a lecturer in finance at the University of Illinois at Chicago and an expert on interpreting financial statements, said a quarterly profit or loss can only be judged in context, given the history of the company and its long-term prospects.
"People who are freaking out about Exxon's record profit are the same people who were freaking out about AOL Time Warner's record losses" of $98.2 billion in 2002, he said. "One quarter's net income or loss doesn't mean anything."
A $9.9 billion quarterly profit is mostly a function of Exxon Mobil's size. It had sales of $100 billion this quarter, more than any other U.S. company.
Even so, many companies smaller than Exxon Mobil "earn" more, depending on what measure is used.
Most financial institutions, such as
commercial banks, are routinely more profitable than Exxon Mobil was in its third quarter. For example, Exxon Mobil's gross margin of 9.8 cents of profit for every dollar of revenue pales in comparison to Citigroup Inc.'s 15.7 cents in 2004. By percentage of total revenue, banking is consistently the most profitable industry in America,
followed closely by the drug industry.
Altria Group, the maker of Marlboro and other cigarettes, made 22 cents for every dollar of revenue in 2004, and pharmaceutical company Merck made 25.3 cents for every dollar of revenue in 2004.
By other measures, such as profit per employee, return on invested capital and free cash flow, Exxon Mobil is nowhere near a standout.
Oil industry analysts yesterday also pointed out that while times are good for oil companies, one of the reasons is the huge American demand for gas at a time when supply is constrained. And the cost of extracting and refining oil in the coming years is only going to increase, requiring hundreds of billions of dollars of investment. Energy research firm John S. Herold Inc. last month predicted that despite short-term increases in profits, higher costs will probably make many U.S. oil companies less profitable in the next five years, even as their revenue grows rapidly.