The trouble with what you've posted below is that your math is too simple. You have to split expenses into fixed and variable, in order to figure out the computed profit based upon increasing sales volume. Variable expenses move in direct proportion to the number of units sold, but fixed expenses do not. A good example of a fixed expense would be rent for training facilities. Whether they sell one unit of product within a quarter, or one million units, the rent is determined by the rental agreement, not by the sales volume. Many expenses are of the fixed expense type, such as the supplement research performed by the team with research expertise. Early on, when sales were minimal, MP would report a net loss no matter how great the product markup was, because they were not selling nearly enough units to cover the large fixed costs. With the sales volume in the recently completed quarter (approx $19 million), and a gross margin of about 31%, there would be nearly $6 million available ($19m x .31) to use towards the fixed expenses. If Muscle Pharm were able to increase sales to $38 million in the following quarter, but were able to keep their fixed expenses in check, they could have $7 million in net earnings rather than the $1 million figure that they recently communicated via the PR. I am not suggesting that they would not increase their fixed expenses, only what the math would yield if they were able to accomplish that. They would likely use some of the gross margin from the additional sales volume to grow the organization (such as add an additional person to the research and development team to aid in the expanding MP product line). So the actual net earnings would likely fall somewhere between $1 million and $7 million (assuming a sales volume of $38 million). As always, simply my opinion.
It's simple math....
MSLP made 19M in sales but only 1M in profits. That's only a 5% profit. In other words, it costs MSLP $18 to make a profit of $1.
So, let's say MSLP receives an order for 38M the following quarter, they would need 36M for operating costs and they have only 19M in the bank, they've got a serious capital problem. Where are they going to get the money to meet the demand? There are a number of ways: inviting capital investors to come on board (Drew would be one such example), borrowing money from banks, selling off assets, receiving advanced payments from distributors and/or issuance of shares.
AI
