To think that this sum is super simple

[PeerieBreeks]

and can't understand how so many people on Facebook have it so completely wrong (and can justify it to themselves).

Without adding your reasoning, tell me what you think the answer is.

buys it for 80.00 voiding his 10.00 profit.

Not true, sounds so logical and certain, but buying something does not wipe out all money made in the past.

The misdirection is in mentioning that it is the same horse.

I don't get it actually..

He originally makes a tenner profit from buying it for £60 and selling it for £70.
Buying it back again for £80 surely means he loses that tenner profit, and is back to 0.
Selling it on again for £90 takes him back to a tenner profit.

That's how I read it anyway

@PurpleRobe

He has an extra 20 in his hand

So that 20 is profit

Buying it back again for £80 surely means he loses that tenner profit, and is back to 0.
By that logic he'd be 'back to -10', not 0 though!

@XmasInTintagel I know, but take pity on a poor woman who didn't press the shift key for the $

So assuming he starts with $70 capital:
He buys for $60
He sells for $70
He has $10 profit + his original $ 10
He buys for back for $80 ( he now has no profit or left over capital)
He sells for $90 so he has $10 profit.
....but he now has $90 capital so he's up by $20 but now my head is going to explode because clearly it's $20 but my brain says $10!

Oops! My friend and I apologise for adding a layer of confusion... it was her who suggested he only had $60 to start off with.

But she does now see he made $20 profit... we used real £10 notes to work through it, though we did consider Rich Tea biscuits as currency , and she was quite surprised that the higher price for the second purchase of the horse made no difference to the profit margin.

We would both suggest that anyone still ruminating do what we did, role play it rather than work out like a maths problem.

Buying it back again for £80 surely means he loses that tenner profit, and is back to 0.

No.

By your logic, stockbrokers would never again buy shares that they have bought in the past.

Xmas

How? As I said, not good at maths.

If he made a tenner profit from selling it for £70, then he buys it back again for £80, surely the tenner profit is spent in buying back the horse? (Can you tell I'm bad?)

alpineibex - no, because you recognise profit and loss by matching up transactions and only counting each transaction once.

After the first purchase and sale, he is $10 up. After the next purchase, he has spend $70 but he owns a horse, so we aren't in a position to close off the profit and loss. Once he sells that horse, he recognises a further $10 profit.

Forget about horses

Let the initial sum the man has be Sstart

At the end of transaction 1 he has Sstart – 60

At the end of transaction 2 he has Sstart – 60 +70

At the end of transaction 3 he has Sstart – 60 + 70 - 80

At the end of transaction 4 he has Sstart - 60 + 70 – 80 + 90 = Sstart + 20

So by the end the man has Send = Sstart + 20

Therefore he makes $20 overall

@alpine Think of it this way.

He makes a $10 profit on the sale of a horse.

The later buys another horse. Horses are now worth $10 more than what they were valued at when he sold his horse.

So he buys the 2nd horse at market value then later sells it for $10 more than he paid.

The second sale has nothing to do with the first sale, other than the possibility that he invested his original profit in the purchase of the new horse.

He takes $60 out of his wallet. Pays for horse.
Sells horse for $70

Puts $10 profit on the table.

Takes $80 out of his wallet. Pays for horse
Sells horse for $90

Puts $10 profit on the table.

$20 up over all

HE has never made a loss. He has missed out on a POSSIBLE $30 up overall if he had held onto the horse the full time, but he has never made a loss.

Yes I see theoretically he has made $20 profit but.....surely when he buys back the horse at a higher price than he's sold that has to be balanced against something else to get a true overview of my day's profit

If he made a tenner profit from selling it for £70, then he buys it back again for £80, surely the tenner profit is spent in buying back the horse?

If you want to put it that way, then he uses the $10 profit towards buying the horse and only needs to put $70 of new money into the purchase. As he then sells for $90, that means his $70 has made him $20 profit. But that's not the most obvious way to think about it!

€10

He has an extra 20 in his hand. But only 10 is profit

So what exactly is the other $10?

OK, now I'm confused. Where does it say that there another horse that he buys? The way it is written it implies that there is only one horse - 'he buys a horse', and all subsequent lines are 'he sells the horse' which would reference that one horse that has already be mentioned... Otherwise they should have always used 'a horse' not 'the horse'.

baking - there's no "theoretically" about it: on the most basic, practical level of cashflow, he has made a profit of $20.

So, reading it as 'the horse' being sold and rebought, not multiple horses, then he doesn't own a horse after he sells it back?

Anyone still having trouble, play horse traders with your dc. Each trader has 10 coins or Lego bricks or whatever and each coin or brick is worth £10. Play out the transactions remembering you are the 'man'. How much do you have after the 4 transactions? You will have £120 so £20 profit.

That is what causes the confusion... it encourages people to see that higher 2nd purchase price as a continuation of the first purchase.

But if you role play it you can see that is not the case - honest!

Ah, also I'm assuming he has no more money other than the original 60 too!

As I said earlier, that makes no difference. He'd have had to borrow $10 for the second purchase and, even after paying it back is still $20 up!

He could have had no money at all to start off with... see above!