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More realistic profit goals: 5 to 10 percent?

Discussion in 'Journalism topics only' started by Frank_Ridgeway, Jun 19, 2009.

  1. Boom_70

    Boom_70 Well-Known Member

    They have 31,000 stores as compared to BK's 11,000. This gives MD much greater economies of scale to reduce expenses. Internationaly MD makes a very high profit margin per store wihich also helps bottom line. MCD has very loyal customer base with that spend more the the avg BK customer.
     
  2. fishwrapper

    fishwrapper Active Member

    and this!!!

    [​IMG]
     
  3. BTExpress

    BTExpress Well-Known Member

    Under normal circumstances, I think the beancounters would suck it up and accept 5-10%.

    But that hardly services the massive debt many companies carry. And therein lies the problem.
     
  4. RickStain

    RickStain Well-Known Member

    That is a better example.

    Point is: Why would anyone invest in something as risky as newspapers for a 5% profit margin, when there are far more profitable investments out there with far less risk.
     
  5. Boom_70

    Boom_70 Well-Known Member

    You hit the nail on the head there. True in many industries. Basic business model is a good one but the debt service is sucking the life blood out of the company.

    This is why those who run a good business should not take the call when the investment bankers are on the other end of the line.
     
  6. fishwrapper

    fishwrapper Active Member

    This is the main issue. 5% profit margin will not carry the large debt service.
    Anyone giving 5% loans to risky institutions these days? That would be -- best case scenario -- a loser. You would need 8-10% to service debt then 5% on top of that to attract any investor. That's 15% and we're back to our old model.
     
  7. somewriter

    somewriter Member

    Net income is measured after interest paid is deducted. However you're defining profit margin, it should be post-interest to be relevant.
     
  8. Boom_70

    Boom_70 Well-Known Member

    EBITA ( earnings before interest and taxes) is what the bankers look at.
     
  9. Joe Williams

    Joe Williams Well-Known Member

    But if the selling prices keep plummeting to a dime on the dollar of what newspapers used to be worth...

    And if deep-pocketed investor or investors didn't have to highly leverage the purchase...

    And if 5% was a sustainable profit margin...

    And (this one is key) if there were other factors -- civic duty, ego, a forum for influence or boost into a city's jet-set social circles -- driving the decision to buy...

    Might not some well-heeled types step to the plate in various markets?

    Wouldn't David Geffen, for instance, be willing to buy the LA Times if he could get it for a fraction of what Zell overpaid and he could rely on it averaging 5% a year in the black vs. hemorrhaging red ink?

    I just wonder what it takes to settle into a reliable 5%? Internet-only? Half the current staff size, paying them two-thirds what they're making now? Web users paying for content? If the ads aren't there, something else better be.
     
  10. somewriter

    somewriter Member

    It's EBIDTA - interest, depreciation, taxes and amortization. And it is not what you look at if you would like to know if a company is going to be solvent. Companies that make a big deal out of EBIDTA are the ones who do not want you to look at the IDTA part of it.
     
  11. Joe Williams

    Joe Williams Well-Known Member

    I read it somewhere just today as EBITDA -- the depreciation and the amortization coming last because they are non-cash. But I see what you're saying, somewriter. :)
     
  12. Boom_70

    Boom_70 Well-Known Member

    that is exactly why ebita is a better gage.
     
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