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In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. [1] It is equal to total revenue minus total cost, including both explicit and implicit costs.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
Without barriers to entry and collusion in a market, the existence of a monopoly and monopoly profit cannot persist in the long run. [1] [3] Normally, when economic profit exists within an industry, economic agents form new firms in the industry to obtain at least a portion of the existing economic profit.
In accounting, as part of financial statements analysis, economic value added is an estimate of a firm's economic profit, or the value created in excess of the required return of the company's shareholders. EVA is the net profit less the capital charge ($) for raising the firm's capital.
Only in the short run can a firm in a perfectly competitive market make an economic profit. Economic profit does not occur in perfect competition in long run equilibrium; if it did, there would be an incentive for new firms to enter the industry, aided by a lack of barriers to entry until there was no longer any economic profit. [11]
The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context.
It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment.
Rate of profit; Rate of return (RoR), also known as 'rate of profit' or sometimes just 'return', is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested; Return on assets (RoA) Return on brand (ROB) Return on capital employed (ROCE) Return on capital (RoC) Return on equity ...