NORMAL PROFIT Definition

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NORMAL PROFIT is the opportunity cost of using entrepreneurial abilities in the production of a good, or the profit that could have been received by entrepreneurship in another business venture. Like the opportunity costs of other resources, normal profit is deducted from revenue to determine economic profit. It is, however, never included as an accounting cost when accounting profit is computed.

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TRANSPORTATON IN is freight costs paid by the buyer therefore added to the costs of merchandise, i.e. part of inventory cost.

FIXED ASSETS are those assets of a permanent nature required for the normal conduct of a business, and which will not normally be converted into cash during the ensuring fiscal period. For example, furniture, fixtures, land, and buildings are all fixed assets. However, accounts receivable and inventory are not. Sometimes called PLANT.

An indicator of a sustainable competitive advantage is if valuable assets on the books at valuation indicate that they are valued at < market price. If so, it may tell about the mindset of the firm's management looking for sustainable competitive advantages.

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