Finance Formulas / July 11, 2018 / Rory Wise
Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs. It’s important to distinguish between accounting profit and economic profit. Accounting profit is total revenue minus the explicit costs of producing goods or services. Explicit costs are things like raw materials and employee wages. This is what most people are referring to when they talk about profit.
DCF analysis is a key valuation tool at analysts' disposal. Analysts use DCF to determine a company's current value according to its estimated future cash flows. For investors keen on gaining insights on what drives share value, few tools can rival DCF analysis.
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