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The global firm’s profit

The global firm’s profit. We have the two equations : R' = C' + I' flow (1) 100 = 60 + 40 R' = C + S m reflux (2) 100 = 80 + 20 So the global firm’s profit :  = C – C' = I' - S m = 20 (3) et (4). The global firm’s accounts. Desagregation of global firm in two sectors.

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The global firm’s profit

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  1. The global firm’s profit We have the two equations : R' = C' + I' flow (1) 100 = 60 + 40 R' = C + Sm reflux (2) 100 = 80 + 20 So the global firm’s profit :  = C – C' = I' - Sm = 20 (3) et (4)

  2. The global firm’s accounts

  3. Desagregation of global firm in two sectors I1 = 20 E1 E2 I’2 =30 I’1= 10 C = 80 I'= 40 C' = 60 households

  4. E2 accounts E1 accounts

  5. Accounts in income-value of the two sectors E2 accounts do not change, since its investment does not come from a purchase and was already counted in income- value. E2 accounts :

  6. Input-output table in prices

  7. Input-output table in income-value

  8. qcvc + wi = (qi + I)vi qivi + wc = (qc + C)vc

  9. 5 15 A B 30 IA=10 IB=10 C CA=30 R’B=30 R’A=20 IC=20 CB=30 R’C=20 H

  10. Input-output table

  11. Input-output table in prices

  12. 15kb +20= 60ka 30ka + 30 = 50kb 20 = 40kc kc = 0,5 ka = 0,5686 kb = 0,9412

  13. Input-output table in income-value

  14. Accounting in prices Firm A Firm B

  15. Firm C Total profit = profit A + profit B + profit C 35 = 25 + (-10) + 20 Total cash = cash A + cash B + cash C -10 = 15 + (-25) + 0

  16. Accounting in income-value Firm A Firm B

  17. Firm C Total profit = profit A + profit B + profit C 14.71 = 20 + (-15.29) + 10 Total cash = cash A + cash B + cash C -10 = 15 + (-25) + 0

  18. R’ = C’ + I’ + DS’ 70 = 45.30 + 20 + 4.71 R’ = C + SH 70 = 60 + 10 P’ = C – C’ = 60 – 45.30 = 14.70 P’ = I’ + DS’ – SH =24.71 – 10 = 14.71

  19. Grouping A + B Accounting accounts Accounting in income value

  20. The Formation of Profit

  21. The goal is to show that profit, as it is calculated by the accountants is (in a closed economy): • The goal is to show that profit, as it is calculated by the accountants is (in a closed economy): = ( = ( - - ') + (IC - IC') ') + (IC - IC') - (tIC - tIC') - (tIC - tIC') + ( + ( - - ') ') + ( + ( - - • ') In which the 2nd term is the gain made by each industry when selli • ') In which the 2nd term is the gain made by each industry when selling intermediate uying these same goods, the fourth the gain earned when selling fixed capital, and the last one results from the evaluation of stocks at the end of the year. t • being the horizontal unity-vector (1……1) By definition the retained profit is t • being the horizontal unity-vector (1……1) By definition the retained profit is t = t = t - t - t ' - t ' - t • , that is revenuesminus monetary incomes minus purchase of intermediate consumption. That can be written: • , that is revenuesminus onetary incomes minus purchase of intermediate consumption. That can be written: = = - - ' - tIC ' - tIC • Using the I.O.T. in income-value we have: t • Using the I.O.T. in income-value we have: t ' = t ' = t ' - t ' - t ’ or ’ or ' = t ' = t ' - tIC’ ' - tIC’ so so = = - - ' – (tIC ' – (tIC - tIC’ - tIC’ • ) When we develop • ) When we develop - - • ' using respectively I.O.T in prices and values we get: • ' using respectively I.O.T in prices and values we get: = ( = ( - - ') + (IC – IC’) ') + (IC – IC’) + ( + ( - - ') ') + ( + ( - - ') – (tIC ') – (tIC - tIC’ - tIC’ • ) q.o.d. • ) q.o.d.

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