Revenue from an activity minus the opportunity cost of the resources used in that activity.
The amount by which a producer's income exceeds total operating costs, including the cost of capital provided by the firm's owners. A zero economic profit means a firm is earning the normal, economy-wide rate of profit in the accounting sense, with investors receiving a rate of return no greater than the return their capital could earn elsewhere in the economy. Positive economic profits will typically attract new entrants (domestic and/or foreign) to the industry .Protectionism may be the response of domestic firms seeking to prevent such entry by foreign competitors, transforming a competitive industry to an oligopoly. Persistent negative economic profits can lead to a shakeout.
The difference between revenues and costs over a period of time, where costs comprise expenditures, opportunity costs, and normal profits.
A firm's total revenue minus all explicit and implicit costs of production, including opportunity costs.
The difference between a firm's revenues and its costs, where the latter include the returns that could be gotten from the most lucrative alternative use of all of the firm's resources.
A firm's total revenue minus total cost. (p. 259)
A general term for various technical measures of profit in which adjustments are made to the traditional accounting definition of Net Income. Such adjustments are typically made in order to better estimate the future value of a business.
Economic profit is a tool to measure shareholder value creation. Economic profit is the Bank's net income before amortization of intangibles less preferred dividends and a charge for average invested capital.
income from continuing operations, after giving effect to taxes and excluding the effects of interest, in excess of a computed capital charge for average operating capital employed.
Our objective is to maximise the value of Cadbury Schweppes for our shareowners. An important financial tool that helps us measure value is economic profit. Traditional ways of measuring performance, such as operating profit after tax or earnings per share, do not take into account the full cost of the capital used to generate those profits. Capital is a combination of the funds provided by shareowners and money borrowed by Cadbury Schweppes, which we use to run the business and fund assets, such as property, office equipment, machinery and working capital. All capital has a cost which must be taken into account to calculate the economic profitability of our business. We only create value when we make a profit greater than the cost of capital invested. We define economic profit as: Operating Profit less Tax less a Capital Charge Where the capital charge is calculated by multiplying the money the business has tied up in capital by the weighted average cost of capital "WACC".
Economic profit is a firm's total revenue minus its opportunity cost. Note that the opportunity cost of the firm includes normal profit. Therefore, economic profit is a residual to the firm (revenue minus cost) while normal profit is one of the costs payable by the firm.
