1. The G for gain is used again below.
It is already so in the argument for the definition of rate of return (proposition 8.6). In this chapter, he continues to refer exclusively to saving placement income or margin, even when it is negative.
2. Let us denote P' all profitability.
The argument of the previous proposition assigns productivity the productivity generic notation P.
3. Only a ratio between an income or a margin G and a flow F is a profitability P' such that P' = G / F.
Any relationship between an income or margin G and a stock S is a rate of return R such that R = G / S and not a profitability P' such that P' = G / F.
4. The monetary amounts that determine these three ratios are themselves three.
The consequence, in addition to being algebraically obvious, x / y = z / y times x / z, is economically so far-reaching that an initiation into economics that does not mention it represses essential reality.
5. The numerators, denoted G, of a rate of return and the profitability corresponding to it are the same.
The denominator S is the same for rate of return and productivity that correspond to each other. Productivity has the numerator F and the corresponding profitability has the denominator F. The application of the rule of three that is established is, with these notations: G / S = F / S times G / F.
6. A good habit is to be adopted.
It consists of asking yourself the following question. As soon as a ratio has as its numerator an income, including profit, or a margin, including business profit, is it certainly or probably a rate of return or a profitability, in the absence of any indication of the denominator, both at the same time?
7. Two uses in particular should be avoided.
One is to say that a rate of profit on capital measures profitability instead of saying that it measures profitability. The other consists, conversely, in saying that a rate on the price-value or the value-cost of sales measures rate of return.