Different models of profit
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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.
