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16 Cards in this Set
- Front
- Back
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business profit
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Residual of sales revenue minus the explicit accounting costs of doing business
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compensatory profit theory
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Above-normal rates of return that reward efficiency
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economic profit
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Business profit minus the implicit costs of capital and any other owner-provided inputs
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expected value maximization
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Optimization of profits in light of uncertainty and the time value of money
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frictional profit theory
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Abnormal profits observed following unanticipated changes in demand or cost conditions
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innovation profit theory
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Above-normal profits that follow successful invention or modernization
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managerial economics
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Applies economic tools and techniques to business and administrative decision making
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monopoly profit theory
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Above-normal profits caused by barriers to entry that limit competition
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normal rate of return
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Average profit necessary to attract and retain investment
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optimize
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Seek the best solution
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present value
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Worth in current dollars
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profit margin
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Accounting net income divided by sales
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return on stockholders’ equity
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Accounting net income divided by the book value of total assets minus total liabilities
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satisfice
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Seek satisfactory rather than optimal results
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theory of the firm
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Basic model of business
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value of the firm
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Present value of the firm’s expected future net cash flows
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