Every selling price is a stack: VAT, retail, transport, marketing, production, and at the very bottom, surprisingly thin, the company's profit. Break down three real examples, check what a "healthy" margin looks like, and see in the balance sheet how companies even finance themselves through their suppliers.
What the state earns on the product, compared with what the manufacturer keeps after corporate income tax.
What percentage of profit on revenue is "healthy"? There is no magic number, but there are ranges by industry. Rule of thumb for the after-tax net margin: below 2% fragile (one shock is enough), 5–10% solid, above 15% very strong. What matters is the comparison within the industry.
Indicative values (ranges); ● = Volkswagen Group 2025: 2.1% after tax, at the lower edge of its industry.
Currently the biggest hope for margins, viewed soberly.
In the short term, automation looks like a margin miracle: each unit needs fewer labour hours, variable costs fall, the contribution margin rises. But structurally a second thing happens: software, computing power, robots and licences are fixed costs. The company trades breathing costs for a rigid block and thereby increases exactly the fixed-cost leverage (→ Costs & leverage). When sales are strong, that is great. When they collapse, the advantage disappears, the fixed-cost block stays.
The second sobering lesson comes from competition: if every supplier can deploy the same technology, the efficiency gains migrate to the customer through price cuts, and margins normalise back to the old level. Lasting higher margins go to those who own something hard to copy: proprietary data, economies of scale, a brand, or well-established customer relationships. Takeaway: AI cuts costs for everyone; it lifts margins only for those with a moat.
Why does electricity cost a multiple of what hydropower generation costs? Because of the merit order: power plants are dispatched sorted by their marginal cost, cheapest first. The last plant still needed to cover demand sets the price for everyone. That is why the gas price couples to the electricity price as soon as gas plants have to fill the gap.
Power plant fleet sorted by marginal cost (simplified teaching model, capacities illustrative). The marker is demand: everything to its left produces, and the most expensive running plant sets the price for everyone.
The balance sheet is a company's inventory of wealth: on the left, what it owns (assets), on the right, who owns it, or rather who financed it (liabilities & equity: equity + debt). Both sides are always exactly equal, because every euro of assets is financed by someone.
Whoever pays only after 60 days lets their suppliers pre-finance production: an interest-free loan that shows up in no credit statistics.
Cash conversion cycle = days of inventory + days until customers pay − supplier payment terms. The longer suppliers wait, the less of the company's own money is tied up in circulation: as of 31 Dec 2025 VW has "parked" €30.5bn interest-free with its suppliers this way. The flip side: for small suppliers this is forced pre-financing, and they carry part of the group's interest and default risk.
The vocabulary of price, balance sheet and financing, in compact form.
Tax on the selling price that the company merely collects and passes on: it never belongs to the company. Austria: 20% standard rate, 10% for food & rent among others, 13% for e.g. culture.
The retailer's share of the net price, out of which it pays staff, rent, warehousing, shrinkage and its own (small) profit. "Supermarket profit" is therefore much smaller than the margin.
The wealth: machines, buildings, inventories, receivables (open customer invoices), cash/bank. Sorted by "how quickly does this turn into money".
The financing of the assets: equity plus debt (bank loans, bonds, trade payables, provisions). Assets = liabilities & equity, always.
What belongs to the owners: paid-in capital + retained profits. It absorbs losses first, demands the highest return in exchange, and is the buffer that cushions losses.
Borrowed money with an obligation to repay: bank loans, bonds, supplier debts. Interest on it is a fixed cost: when the policy rate rises, the fixed block grows (→ Costs & leverage, Dependencies).
An exchange of money across time: purchasing power today, repayment + interest tomorrow. It appears twice in the balance sheet, as money on the asset side and as a liability on the other side.
Arises automatically from payment terms: the supplier delivers today and gets its money in 30–120 days. Interest-free for the buyer, tied-up capital for the supplier. An early-payment discount (e.g. 2% for payment within 14 days) is the "price" of this credit: annualised, often more than 20% interest!
Inventories + receivables − trade payables: the money tied up in day-to-day business. When revenue grows, it grows too and must be financed; growth costs liquidity first.
Profit ÷ revenue. Pre-tax (EBIT margin) measures the operating business, after tax the owners' view. Always read together with asset turnover.
Tax on the profit of a GmbH/AG: in Austria 23% (since 2024). If the rest is distributed to owners, 27.5% capital gains tax is added, roughly 44% in total on distributed profit (→ Work & taxes).
NoVA, the Austrian car registration tax on new car purchases, is tiered by CO₂ and comes on top of VAT in a car's price.