According to Dr. Ray Batina of Washington State University, zero economic profit is the profit maximization point. At this point, price is equal to marginal cost. This scenario only applies to a perfectly competitive market.
According to Oregon State University, economic profits and accounting profits are different. Accounting profits are the total revenue minus the total costs. Economic profits are total revenue minus implicit and explicit costs. These include opportunity costs, which are costs a business gives up that are not in the budget, such as a salary from another business in lieu of self-employment. Just because a business has zero economic profits does not mean that the business is not turning an accounting profit. In fact, a firm that produces zero economic profits produces an accounting profit, all else being equal. In the short run, some firms do not maintain zero economic profit. At this point, price is less than average total costs.
According to Penn State University's Department of Energy and Mineral Development, in order for profit maximization of a firm to occur, implicit and explicit costs must equal total revenue. Otherwise, the firm loses money or has too little supply and too great a demand to maintain price in the long run.Learn More
Asset utilization is a ratio used by business analysts to determine how well a company is using its available assets to generate a profit. Asset-utilization ratios are used to determine the profitability of everything from inventory to accounts receivable, sales and total asset turnover.Full Answer >
Prorated amounts are calculated by dividing the cost of a service by the number of days in the service period, according to Lucas Hall from Landlordology. The resulting number is then multiplied by the number of days the service is used to find the prorated amount.Full Answer >
A process improvement plan refers to a planned endeavor to analyze the existing business processes, identify problems and rectify them to improve the standards of quality and effectively meet new objectives. Such a plan entails a systematic approach that utilizes various methodologies and approaches, including lean marketing or benchmarking. The plan sets a goal to modify, complement or remove specific processes to achieve improvement.Full Answer >
A business analyst can evaluate tangible benefits using key performance indicators and benchmarks such as a cost-benefit analysis or an opportunity-cost analysis. An analyst can evaluate non-financial benefits by demonstrating how such benefits help an organization realize its financial objectives.Full Answer >