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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LETTER OF INTENT (LOI) is a document that describes the preliminary understanding between parties who intend to make a contract or join together in another action.

POOLING OF INTEREST METHOD is an accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the PURCHASE METHOD, which uses market value. The merging entities` financial results are combined as though the two entities have always been a single entity. See POOLING-OF-INTERESTS.

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