[87tau]

So, it looks like GDP would be comparable to total market value of products and services provided the company in a year. That would be equal to revenue ignoring any free products/services the company provides (or do we also need to take into account sale of pre-owned products by third parties? ) I guess. Out of curiosity, is there a number then that is equivalent to market value of a company but applicable to a country?

[thanatropism]

Level 0: GDP is a flow, market value is a stock. Market value is a distance reached, GDP is a velocity.

Level 1: GDP is gross domestic product. It's not adjusted down for depreciation in order to be the Net domestic product. The proverbial Chaplinian window-breaker who sells windows adds to GDP, but not to NDP.

Integrating the net domestic product over time would get you something like the accumulated wealth of a country.

Level 2: There's a differentiation between the gross domestic product and the gross national product. GDP means within-borders; this includes for example the income of migrant workers who remit cash to their families abroad. GNP means by-national-citizens (and companies); many American companies have operations abroad, for example.

Level 3: Integrating a company's (discounted expected) net revenue will give you its market value, roughishly. But what constitutes a country's net revenue is murkier. It would seem that countries who are net importers are in the red, but imported goods generates consumer welfare that's not easily accounted for. To the extend a national economy can even have goals (it cannot), it isn't to maximize net exports.

It goes on.

[87tau]

Thanks for the reply. I'm not an expert in economics and also not sure how much wikipedia is to be trusted, but going by definition: "IMF publication states that "GDP measures the monetary value of final goods and services—that are bought by the final user—produced in a country in a given period of time (say a quarter or a year)", GDP is an aggregate over a time period, more like distance and not similar to velocity. GNP though is interesting, I hadn't heard of it before, I will explore it further.

[thanatropism]

Yes, but this is an artifact of discrete time.

In discrete time increments, your running velocity is an aggregate of how much you walked over an hour. Or something.

[sonnyblarney]

Not really.

The 'valuation' of a company is basically the present value of all it's estimated future cash flows (edit: by this I mean profit).

So think of Apple like a 'cash machine' - and it spits out profit to the bank account.

Well - the 'valuation' is just how much we think will be in that bank account.

The inherent problem with this is 'seeing the future' - both in terms of predicting future cash flows way out ... that's obviously hard, but the second part ... is the fact that the value of 'future cash flows' to you might be different than it is to someone else!

Basically, the way we calculate the 'present value' of those future cash flows is by discounting those values by some amount - $100 in 100 years is worth less than $100 tomorrow.

But what 'discount rate' do you use? That's another hard question. Typically, it's the 'risk free rate' i.e. the rate of return you can get on your money by parking it somewhere and doing nothing.

Another term for that is 'cost of capital'. Everyone's 'cost of capital' is different.

So when everyone takes there estimates of 'future Apple cash flows' and then applies their specific 'discount rate' - we then have a balance of supply and demand for their shares and voila - a 'market cap'.

Also we should point out that this is private wealth - and that massive surpluses in one part of the value chain isn't necessarily healthy for you, for me, for anyone else, or 'the economy'.

For example - what if Apple had more competition? Well, then we might be getting the very same great Apple products for 20% less. Apple might be making 'very little profit' but nevertheless be providing you and I with vast consumer surpluses.

In a funny way - every dime that a corporation makes in 'profit' is a dime that you and I (as consumers) are losing out on in terms of consumer surplus.

[hsitz]

> The 'valuation' of a company is basically the present value of all it's estimated future cash flows.

?? A company could have huge future cash flows yet operate with zero profit, or with a loss.

Maybe you're referring to the Dividend Discount Model of valuation. In that case the only flows that are discounted to present value are the future dividends paid to shareholders, which are tiny subset of a company's future cash flows. https://en.wikipedia.org/wiki/Dividend_discount_model

There's so much loose and confused use of terminology in threads like this generally, that I tend to think they're unhelpful to the majority of people who read them.

[sonnyblarney]

Future cash flows to be interpreted as 'free cash flows' i.e. profit.

What I'm articulating is not complex or obscure or even really very theoretical - it's literally the most basic idea for valuation, though admittedly the term 'cash flow' might be misleading in the context of accounting.

'The company is worth how much money it will eventually put in the bank i.e. how much profit it accumulates'.

That's it.

Dividends are a separate thing and technically have no effect.

If a company pays you a $1 dividend, then you have $1. If a company keeps that $1 for you in it's bank account ... well, you have ownership of that $1. So it's a matter of accounting, not of valuation. Pragmatically, there are differences but theoretically dividends don't matter.

[AdamM12]

Wealth Per Capita * Population? Given a country is just a bunch of people the total amount of wealth of that subset of people would be it.

[mc32]

You could add up all the market caps of all of a country’s businesses, but thst only captures publicly traded companies... So, not sure it can be done directly, but indirectly by extrapolating onto private cos and enterprises, but that still would not capture grey market activities, etc.