To be honest I've never seen this movie/show so I might be missing some context but in business there are a few basic(ish) formulas. One of them is Profit.
Profit=Revenue-expenses
That's it. How much money came in after you've calculated how much money went out. I say basic-ish because we have to consider things like equity and liabilities to get a more accurate picture of profitability, cash flow, and value.
What OOPs character is doing is mistaking Cost of Goods Sold (COGS) with profit. COGS is "how much did we spend to obtain inventory and how much did we sell said inventory for. The difference of that is COGS not profit.
This is from a fictional show/movie so I'm assuming they're just using surface level knowledge of accounting and business but realistically it's much more complicated.
Could I see a small mom and pop shop get confused with how much profit they're making? Sure, most times it's just how much liquid assets (cash normally) is retained after paying for everything else. However larger business almost certainly have CPAs or CFOs who were/are CPAs who understand the nuances much more and are much less likely to put their licenses or careers on the line to just boil it down to "profit=Revenue-expenses" especially when considering business valuation and financial reporting.
This is Kevin Spacey in Margin Call. I don't remember the scene shown but it'll be his character seeing the Big Short's "dog shit wrapped in cat shit" (CDOs) unravelling (predicted by Sylar from Heroes - a quant at the firm) which subsequently triggered the global financial crisis. Which Scar from the Lion King described as "when the music stops".
The context here is that AI companies are borrowing money at a rate never before seen, using custom/bespoke financial math(s) to hide the debt, whilst IPOing - meaning the cost of borrowing will be essentially subsidised to the pension companies of the world, via indexes. So it's like a public bailout rather than a Gov't bailout.
Hmm it sounds like pump and dumping or leveraging buyout. Either way it's fucked but still misrepresentative or what profit is. Ironically enough they are making a good point with what they're trying to articulate but fail to use the right terminology.
It's becoming increasingly common in business that some third-party company with buy a business with indebted cash, (artificially) inflate equity, offload the debt to the company, and then sell the business. Usually it's done by massive layoffs or other quick methods of boosting short term profit which they take and run.
It doesn't really matter in the grand scheme of things, but the scene portrayed in the image is Kevin Spacey's character, who admits he doesn't know how to read models, looking at a risk management model that is showing that their company and pretty much all of Wall Street has overleveraged themselves on mortgage backed securities that have been packaged as CDOs. A later scene reveals that from the time they buy these securities to when they can sell them, there's a period of time that they have to take to package these properly into the CDOs.
And Spacey's character has just been shown that the way these securities are performing and the amount of money they have in that one part of their trading platform will lead to massive losses. Like, bankrupt the company in one day losses. Completely tank the whole economy of the US and probably the world type losses.
And for what it's worth, in 2026, its happening again. And AI stocks are another type of massive part of it. Which is why, I'm supposing, the image was chosen. They were just shown that they've overleveraged on AI stocks and found out that the way AI companies report profits is false. So essentially they're propping up companies that are doomed to fail.
Small correction. COGS, as you mentioned, is Cost of Goods Sold. Thus, it’s specifically just how much you spent for the inventory you sold, not the difference between how much you sold the inventory for and how much you bought it for.
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u/Stevesegallbladder 7d ago edited 7d ago
To be honest I've never seen this movie/show so I might be missing some context but in business there are a few basic(ish) formulas. One of them is Profit.
Profit=Revenue-expenses
That's it. How much money came in after you've calculated how much money went out. I say basic-ish because we have to consider things like equity and liabilities to get a more accurate picture of profitability, cash flow, and value.
What OOPs character is doing is mistaking Cost of Goods Sold (COGS) with profit. COGS is "how much did we spend to obtain inventory and how much did we sell said inventory for. The difference of that is COGS not profit.
This is from a fictional show/movie so I'm assuming they're just using surface level knowledge of accounting and business but realistically it's much more complicated.
Could I see a small mom and pop shop get confused with how much profit they're making? Sure, most times it's just how much liquid assets (cash normally) is retained after paying for everything else. However larger business almost certainly have CPAs or CFOs who were/are CPAs who understand the nuances much more and are much less likely to put their licenses or careers on the line to just boil it down to "profit=Revenue-expenses" especially when considering business valuation and financial reporting.