Quote from: twiifm on March 29, 2015, 03:36:55 PM

Dinofelus is talking BS that has nothing to w real world.

Its just cashflow. Dont need to make it sound conplicated

Yes, it is cashflow. Now tell me, is cash flow free ?
If you immobilise (I called it "freeze") money in raw materials, machines and other things for a year, do you think that that is for free ?

Consider these two different business plans:

A) Joe needs to buy a computer worth $10 000 000 on January, and will design, using that computer, a new spoon. In June he will buy $1000 of metal and make spoons out of it, which he will sell in December for $1200,-. At that point he will sell his computer for $10 000 000.

B) Jack needs to buy a PC worth $1000 on January, and will design, using his PC, a new spoon. In June he will buy $1000 of metal, make spoons out of it, and he will sell them in December for $1200,-. At that point he will sell also his PC for $1000,-.

Are you SERIOUSLY saying that both Joe and Jack are going to make the same profit, namely $200,- Huh

My point is that if the interest rate is, say, 2%, then Jack is making a profit of $200 - $10 - $20 = $170
(the $10 is the $1000 of metal that he immobilised for 6 months, and the $20 is the $1000 of his PC that he immobilised 1 year)

Joe, on the other hand, is making a monumental loss of about $200 000. In fact, his loss is exactly:
200 000 + 10 - 200 = $199 810,-

If you monopolise capital (here, $10 000 000) during a certain time (if you "freeze" it), then that costs money. The cost is called the interest.