Replies to post #126822 on Intel Corp (INTC)

[Sarmad]

>> You might think about allocating a portion of the cost of the house to the room and taking depreciation charges to offset your profits.
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Yes, in my initial reply to your post I had already acknowledged that plant and equipment depreciation is used in tax accounting. The issue is whether depreciation is used in "gross margin" calculation.

Obviously, anyone can define the words "gross margin" to suit their purpose. However to be useful, the words "gross margin" should indicate the level of profit that would result when you increase unit volume and revenue. If Intel's gross margin is 60%, it must mean that when they sell something for 100 dollars, pretax profit increases by 60 dollars. There is no place for counting any overhead or depreciation in this calculation. Those expenses are not altered by increasing revenue (within the same plant and equipment).

Very possibly someone might like to use the words "gross margin" in a different way. By if they did, the number would be less useful.