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  1. #1
    japanjapan is offline Member
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    Default What does "the carrying costs" mean?

    Dear teachers,

    Please look at the following paragraph:

    Many captive shippers also worry they will soon be hit with a round of huge rate increases. The railroad industry as a whole, despite its brightening fortunes, still does not earn enough to cover the cost of the capital it must invest to keep up with its surging traffic. Yet railroads continue to borrow billions to acquire one another, with Wall Street cheering them on. Consider the $10.2 billion bid by Norfolk Southern and CSX to acquire Conrail this year. Conrail’s net railway operating income in 1996 was just $472 million less than half of the carrying costs of the transaction. Who’s going to pay for the rest of the bill? Many captive shippers fear that they will, as Norfolk Southern and CSX increase their grip on the market.

    What does "the carrying costs" mean?
    How much does it account for the transaction?

    Thanks

    PS the sentence may be like this:
    Conrail’s net railway operating income in 1996 was just $472 million, less than half of the carrying costs of the transaction.

    I mean there is probably the comma, but I am not sure, anyway, my question is what "the carrying costs" are?

    Thanks again

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    Default

    overall operating expenses

  3. #3
    japanjapan is offline Member
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    Quote Originally Posted by twostep
    overall operating expenses
    Are you sure?
    I doubt it.
    Is the operating cost more than $500m? Is it such expensive?
    I always suspect "carrying cost" is an economic jargon.

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    Default Re: What does "the carrying costs" mean?

    Conrail’s net railway operating income in 1996 was just $472 million less than half of the carrying costs of the transaction.

    Quote Originally Posted by Investor Words
    The charges a lender imposes on a business for lending money, in the form of interest, finance charges, and processing fees.
    Source

    All the best,

  5. #5
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    MikeNewYork is offline VIP Member
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    Default Re: What does "the carrying costs" mean?

    Quote Originally Posted by japanjapan
    Dear teachers,

    Please look at the following paragraph:

    Many captive shippers also worry they will soon be hit with a round of huge rate increases. The railroad industry as a whole, despite its brightening fortunes, still does not earn enough to cover the cost of the capital it must invest to keep up with its surging traffic. Yet railroads continue to borrow billions to acquire one another, with Wall Street cheering them on. Consider the $10.2 billion bid by Norfolk Southern and CSX to acquire Conrail this year. Conrail’s net railway operating income in 1996 was just $472 million less than half of the carrying costs of the transaction. Who’s going to pay for the rest of the bill? Many captive shippers fear that they will, as Norfolk Southern and CSX increase their grip on the market.

    What does "the carrying costs" mean?
    How much does it account for the transaction?

    Thanks

    PS the sentence may be like this:
    Conrail’s net railway operating income in 1996 was just $472 million, less than half of the carrying costs of the transaction.

    I mean there is probably the comma, but I am not sure, anyway, my question is what "the carrying costs" are?

    Thanks again
    I agree with Cas's answer. It refers to the cost of the financing, not the purchase itself. The sentence could be correct with or without the comma, but the meanings are very different.

    Without the comma, Conrail's income was 472 million dollars less than half of the carrying charges.

    With the comma, Conrail's income was 472 million dollars. This 472 million dollars was less than half of the carrying charges.

    Because of the way it is written and particularly because of the word "just", it is likely that the comma version was intended. :wink:

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