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BEAR MARKET: A condition of the stock market in which stock prices are generally declining and most of the participants expect this decline to continue. In other words, the stock market is into an extended period of "hibernation" that could last for months or even years. This isn't the same as a "crash" of falling stock prices over a short time (like one day). A bear market usually occurs because investors see a sluggish, stagnant economy with few signs of robust growth.
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                           ACCOUNTING PROFIT: The difference between the revenue received by a firm and the explicit accounting cost incurred. This is the profit listed on a firm's balance sheet, appears periodically in the financial sector of the newspaper, and is reported to the Internal Revenue Service for tax purposes. While accounting profit is the "standard" designation of profit used in the business world, economists prefer to use economic profit More often than not, accounting profit differs from economic profit. In some cases, the two have almost no correlation. The reason rests with the difference between accounting cost and economic cost. Some accounting cost is not an opportunity cost and some opportunity cost is does not show up as an accounting cost.The primary difference between accounting profit and economic profit rests with normal profit. Normal profit is the profit a firm (that is, entrepreneurship) could receive in an alternative venture. Much like labor incurs an opportunity cost by producing one good rather than another, entrepreneurship foregoes the profit that could be earned in one activity when it undertakes another. For example, Phoebe Pankovic might be paid $10 an hour to produce Wacky Willy Stuffed Amigos (those cute and cuddly armadillos and tarantulas) to compensate for a $10 wage that could be earned producing Hot Momma Fudge Bananarama Ice Cream Sundaes. In a similar manner, William J. Wackowski, the entrepreneur who organizes the production of Wacky Willy Stuffed Amigos, foregoes profit that could be earned producing another good, such as Hot Momma Fudge Bananarama Ice Cream Sundaes. This foregone profit is an opportunity cost of entrepreneurship and is deducted from revenue to calculate economic profit. However, it is NOT deducted from revenue to calculate accounting profit.
Recommended Citation:ACCOUNTING PROFIT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: April 19, 2024].
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