Return on investment in excess of the average cost of capital in the overall market Alternatively, profits excluding profits from the increase in value of inventory which the company holds
The financial performance measure which has the highest correlation to investor value and the true economic profit of the enterprise It is the net operating profit after taxes minus an appropriate capital charge for the opportunity cost for the invested capital
A firm's profit over and above the profit that would provide the firm's owners with a competitive rate of return on the capital they invested in the firm May be positive, zero, or negative