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Hi. I am a shipping company director, transport academic, author, family man and all round nice guy. I have worked as shipbroker, shipowner, freight trader and bulk charterer, in senior positions, with some of the largest and most disrespected (joke) companies in the world. Ask my advice on all things shipping and you will receive my blunt and always honest answer. Hang around to learn more about chartering and ship broker salaries, chartering and ship broker jobs, chartering and shipbroker recruitment agencies, cheap freight, maritime education, chartering and ship broker qualifications, become a ship broker, tips on how to be a successful bulk shipping executive, philosophy, Zen and the art of shipbroking, and much more. Yours The Virtual Shipbroker (recently proclaimed the guru of shipbroking) Copyright © 2009-17 by Virtualshipbroker

Tuesday, January 19, 2010

Answer

If you bought a house 10 years ago for USD 100k and only just sold it for USD 150k you could say that you have made a 50k profit (not taking into account inflation, opportunity cost etc).

However if the house next door, exactly the same, sold 2 days earlier for USD 200k would you still think you have made a profit?

I am using the word profit liberally in the explanation. And this is the same with voyage calculations. In a voyage calculation the shipowners is not attempting to find the 'profit' figure against all his costs. He is looking to find the profit figure against the 'Market'.

The market represented by the the 'Timecharter IN' figure he or she uses in the calculation.

So in the case of the house - against the market the guy looks to have made a usd 50k loss.

(NB in a voyage calculation we have a final profit or loss figure. This can also be represented with a surplus or deficit figure. Same thing!)

Cheers
VS

6 comments:

  1. VS / Milano

    Is it what you mean "Think like a trader instead of owner"

    brgds.

    ReplyDelete
  2. Hi,

    The term opportunity cost, is it accountable? i think finance dept would have deep stress stating the account for the example. Tried once before (like your example), but seems it didnt changed the decision.

    any suggestion?

    Rgrds
    Angga

    ReplyDelete
  3. 2 rules in international shipping - stay away from lawyers and ACCOUNTANTS! Otherwise business will never get done!

    Cheers
    vs

    ReplyDelete
  4. VS,

    Never commented on your blog, LOVE IT - keep it up!

    Well said, i think everyone looks at profit against the market - In all aspects of life!

    Must know the Market well.

    ReplyDelete