Quick reminder: profit, expense and cash flow
To stay calm , we use the basic trick: profit is what comes in less what goes out over a complete sequence. In other words, we never calculate a gain at the time of purchase (which is an expense), but at the time of sale (which confirms the value). Like at a garage sale: as long as the object is not resold, the gain does not really exist.
Step by step: unraveling the cow riddle
We follow the thread, calmly:
- You buy the cow for €800. At this point, there’s no profit, just an outflow of money.
- You sell it for €1,000. This first “buy + sell” sequence results in: €1,000 – €800 = +€200.
- You buy it back for €1,100. Again, this is just an expense; no gain at this point.
- You resell it for €1,300. Second complete sequence: €1,300 – €1,100 = +€200.
Add up the profits of the complete sequences (and only them): €200 + €200 = €400. Yes, that’s it! We don’t mix purchases between sequences, we don’t average prices , we respect the natural order: each sale validates the profitability of the previous purchase.
The classic trap to avoid
Many people think that buying back at €1,100 “eats up” the first €200 profit. In reality, it simply initiates a new transaction. Imagine two successive train tickets: one cost you €800 and brought in €1,000, the other cost you €1,100 and brought in €1,300. Each journey has its own profitability; you don’t mix the tickets to recalculate the overall route. Moral: we reason in complete blocks “buy → sell”.
Practical tip to avoid making mistakes
When a problem involves multiple round trips of money, draw two columns on a corner of a sheet of paper: Outflows (purchases) and Inflows (sales). Then group the transactions into logical pairs. Here:
Sequence 1: entry €1,000 – exit €800 = +€200.
Sequence 2: entry €1,300 – exit €1,100 = +€200.
Then, add up the profits from the sequences: +€400 in total. It’s as simple as whipping egg whites: step by step, without rushing.
In a clear and quantified summary
First transaction: €800 → €1,000 = +€200.
Second transaction: €1,100 → €1,300 = +€200.
Total profit: €400.
Keep this method handy: as soon as the numbers get tangled up, break the story down into small scenes… and the solution emerges naturally!
