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Economic Profit

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Also known as residual income, economic profit is a managerial accounting concept that considers how well a business is performing by, among other things, deducting the firm's capital costs from its profits. What is left is known as an economic profit, as opposed to the familiar accounting profit that appears on corporate income statements, and some believe this better suggests how well the company is using capital to build economic value.

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Copyright © 2011 Advameg, Inc.