Subtract both explicit and implicit costs to find economic profit.
Please do not make financial decisions based on these results.
What is the Economic Profit Calculator?
Subtract both explicit and implicit costs to find economic profit. To use the Economic Profit Calculator, enter total revenue, explicit costs, implicit costs; it returns economic profit, accounting profit, and shows them instantly as you type.
From revenue to cash flow
Work down the income statement: gross margin, operating margin, EBITDA and net margin. Then confirm profit is real cash with the free cash flow calculator and the accrual ratio.
Efficiency ratios show how fast money turns. The Cash Conversion Cycle Calculator combines DSO, DIO and DPO into one number of days.
- Costs. Marginal cost, average variable cost and the optimal price tools support pricing decisions.
- Elasticity. Price, cross-price and income elasticity show how demand reacts.
How to use the Economic Profit Calculator
- Enter your numbers. The inputs are Total revenue ($), Explicit costs ($), Implicit costs ($). Use numbers from the same accounting period so the ratios are comparable. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Economic profit, and the cards below show Accounting profit. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Economic Profit Calculator using the default values shown in the calculator above:
Inputs
| Total revenue ($) | 500,000 |
|---|---|
| Explicit costs ($) | 340,000 |
| Implicit costs ($) | 90,000 |
Results
| Economic profit | $70,000.00 |
|---|---|
| Accounting profit | $160,000.00 |
With these inputs the calculator returns Economic profit: $70,000.00. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Total revenue ($) from 500,000 to 600,000 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Economic profit | $70,000.00 | $170,000.00 | +142.9% |
| Accounting profit | $160,000.00 | $260,000.00 | +62.5% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the Economic Profit Calculator reports Economic profit and accounting profit. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
Why can economic profit be negative while accounting profit is positive?
The business may earn less than the owner could in the best alternative use of time and capital.
Why use average balances?
Ratios that compare a flow (sales, income) with a balance (assets, equity) are fairer when the balance is averaged over the period.
What is the cash conversion cycle?
It is DIO plus DSO minus DPO: the days between paying suppliers and collecting from customers.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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