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/biz/ - Business & Finance

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675352 No.675352 [Reply] [Original]

>software companies incur a marginally higher R&D expense than normal companies
>software companies have literally 0 distribution costs
>congress doesn't see a problem with all these software companies posting up huge income statements while traditional companies get fucked because of huge COGS and variable costs

why the fuck is this allowed?

>> No.675354

Why would it be a problem?

>> No.675359

>>675354
Because it's misleading as fuck and impossible to determine if these software companies are actually profitable because after initial R&D all you need to pay for is a server to upload the file and that's literally it for COGS and variable costs

>> No.675362

>>675359
Why is it misleading? You can still look at revenue, cash flow, and the balance sheet.

>> No.675375

What the fuck is going on in this thread..?

>> No.675378

>>675375
I have no idea. It sounds to me like:
>software companies have low costs
>therefore problem
There's some piece missing here that OP hasn't explained yet.

>> No.675405

>>675378
Hmmm, agreed. I'm hearing
>Congress should help me understand the financials of disparate industries.
or maybe
>Congress should limit the profitability of software companies.

Op, help us understand your pain!

>> No.675406

>>675352
Also congress doesn't really set accounting rules.

Your complaint is that R&D isn't amortized over the life of software sales? Do you really want to argue accounting principles on 4chan?

Also, remember financial statements include balance sheets and cash flow statements with the mandatory "the notes to the basic financial statements are an integral part of this statement"

>> No.675437

>low-overhead industries make high profit margins compared to high overhead industries
>this makes them attractive to investors
>incidentally it makes OP mad because he thinks that basic accounting is "deceptive"

I don't know whether to cry or laugh.

>> No.675445

>>675437
No no, it doesn't make him 'mad', per se, he just thinks it shouldn't be allowed.

>> No.675448

>>675445

Yes, because accounting makes him mad.

>> No.675553

>>675352

Software companies don't have one huge slug of R&D that they stop when they release the product, they have ongoing expenses they fund out of cash flow. You're correct that COGS is functionally 0, but the flip side of that is that personnel expenses are fucknormous relative to, say, a industrial concern. It all balances out, the tech sector has something like 8% margins instead of 6%, it's really not that huge a deal.

>> No.675935

>>675406
>Also congress doesn't really set accounting rules.

>http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act
>http://en.wikipedia.org/wiki/Financial_Instruments_and_Exchange_Act
>http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation

Jesus take an accounting class