Difference between revisions of "Different models of profit"
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| − | + | In [[Management Control|Management Control]]@mbi there are two different concepts for profit: | |
| + | * [[The economic concept of profit|The economic concept of profit]] | ||
| + | * [[The accounting concept of profit|The accounting concept of profit]] | ||
| + | |||
| + | {| class="wikitable" | ||
| + | !The economic concept of profit | ||
| + | !The accounting concept of profit | ||
| + | |- | ||
| + | |Cash Based | ||
| + | |Accrual based | ||
| + | |- | ||
| + | |Future Oriented | ||
| + | |Hindsight oriented | ||
| + | |- | ||
| + | |Decision Support | ||
| + | |Reporting to the outside world | ||
| + | |- | ||
| + | |Time Value ([[WACC|WACC]]) | ||
| + | |Only interest taken into account (not full cost of capital) | ||
| + | |- | ||
| + | |Multi period | ||
| + | |One period | ||
| + | |- | ||
| + | |} | ||
| + | The cost of capital is ''severely'' underestimated in the accounting concept of profit. | ||
[[Category:finance]] | [[Category:finance]] | ||
Revision as of 19:24, 27 August 2020
In Management Control@mbi there are two different concepts for profit:
| The economic concept of profit | The accounting concept of profit |
|---|---|
| Cash Based | Accrual based |
| Future Oriented | Hindsight oriented |
| Decision Support | Reporting to the outside world |
| Time Value (WACC) | Only interest taken into account (not full cost of capital) |
| Multi period | One period |
The cost of capital is severely underestimated in the accounting concept of profit.
