Quizzes & Puzzles5 mins ago
Negative Operational Gearing, Compounded By Vertical Integration
Surely seemingly educated people should be able to communicate better than this example I saw today...
// "If we take inflation into account then the volume position is truly disastrous, with negative operational gearing, compounded by vertical integration, eating into margin." //
What does it mean?
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And why do newpapers aimed at the general public, print such gibberish?
// "If we take inflation into account then the volume position is truly disastrous, with negative operational gearing, compounded by vertical integration, eating into margin." //
What does it mean?
http://
And why do newpapers aimed at the general public, print such gibberish?
Answers
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Jno,
I think someone at the Telegraph must have realised it was meaningless gibberish and cut it from the article.
It was there earlier when I copied the quote and link.
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I think someone at the Telegraph must have realised it was meaningless gibberish and cut it from the article.
It was there earlier when I copied the quote and link.
http://
ah yes, it's in this report, not aimed at the general reader (but not aimed at analystspeakers either)
http://
The Telegraph probably just cut and pasted it, then thought better of it (or were warned about plagiarism).
http://
The Telegraph probably just cut and pasted it, then thought better of it (or were warned about plagiarism).
Its just management speak to attempt to explain poor performance and lack of profit.
Operational gearing is the relationship between a companies fixed costs, and sales growth. No operational gearing should mean that operating profit rises in direct proportion with sales growth.High, or positive operational gearing offers a greater operating profit from sales growth; low or negative operational gearing means no profits or even an operating loss from sales growth.
Vertical integration is the acquisition of companies at different points in the supply chain.
Inflation always tends to eat into profits, and volume selling is usually the sales of high volume low margin products, so any small change can have a big impact on sales/profits.
Operational gearing is the relationship between a companies fixed costs, and sales growth. No operational gearing should mean that operating profit rises in direct proportion with sales growth.High, or positive operational gearing offers a greater operating profit from sales growth; low or negative operational gearing means no profits or even an operating loss from sales growth.
Vertical integration is the acquisition of companies at different points in the supply chain.
Inflation always tends to eat into profits, and volume selling is usually the sales of high volume low margin products, so any small change can have a big impact on sales/profits.
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it strikes me that "If we take inflation into account then the volume position is truly disastrous" is meaningless.
Surely sales volume (the number of products sold) is different from sales revenue (the money you got from selling them)? Inflation would affect the latter, when you compare them with revenues from an earlier period, but shouldn't have anything to do with sales volumes; so you've no need to take it into account at all.
Maybe I'm missing something.
Surely sales volume (the number of products sold) is different from sales revenue (the money you got from selling them)? Inflation would affect the latter, when you compare them with revenues from an earlier period, but shouldn't have anything to do with sales volumes; so you've no need to take it into account at all.
Maybe I'm missing something.
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