A normal profit is the least amount of money needed for any company to remain viable. This is a different category from other similar profit selectionsÊsuch as Economics or accounting.
Price under perfect competition is determined by the forces of demand and supply of the industry. The price once fixed up by the industry is taken up by all the firms and the firm can sell any number of units at hat price.=The firm may earn normal profits, super normal profits in the short run whereas it earns normal profits in the long run.=
Price under perfect competition is determined by the forces of demand and supply of the industry. The price once fixed up by the industry is taken up by all the firms and the firm can sell any number of units at hat price.=The firm may earn normal profits, super normal profits in the short run whereas it earns normal profits in the long run.=
greater then economic profits,as accounting profits do not include implicit costs
Profits = revenues - expenses
Supernormal profits due to high barriers to entry. Profits in the long run are determined by the barriers to entry. If there is high barriers to entry, new firms cannot enter the industry easily and hence cannot competed with existing firms for profits. Existing firms would be able to enjoy supernormal profits. On the contrary, weak barriers to entry means that the long run profits would be competed away by new firms entering the industry, hence firms would earn normal profits. Oligopoly market is characterised by high barriers to entry, largely due to non-price competition such as branding, advertising, etc. High barriers could also be due to economies of scale and high fixed cost.
Price under perfect competition is determined by the forces of demand and supply of the industry. The price once fixed up by the industry is taken up by all the firms and the firm can sell any number of units at hat price.=The firm may earn normal profits, super normal profits in the short run whereas it earns normal profits in the long run.=
Price under perfect competition is determined by the forces of demand and supply of the industry. The price once fixed up by the industry is taken up by all the firms and the firm can sell any number of units at hat price.=The firm may earn normal profits, super normal profits in the short run whereas it earns normal profits in the long run.=
Back-end profits are those made off non-direct sales for a business. These can be things like the sale of old equipment which benefit the company but are not a normal part of day to day operations.
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Bottom-line profits
greater then economic profits,as accounting profits do not include implicit costs
SmartShop's profits have been growing at 5% per year. This year their profits were approximately $500,000. What were their profits last year?
The company's profits decreased by 12%
The answer depends on the period for which the old profits are required.
Profits = revenues - expenses
They recieved few profits
Goodwill is the value of reputation of a irm in respect of the profits expected in future over and above the normal rate of return, which other companies can earn. Over and above the normal rate implies that the firms capability to earn more profits when compared to other firms because of its good brand name, locational advantage, good customer relations or possession of a unique patent right. The impact of goodwill on the net income is that, as good will is amortized the amount of profits get reduced. This further reduces the balacne of reserves and surplus amt in the balance sheet.