Economic Profit Calculator
Find the true profit of a business by subtracting both explicit (monetary) costs and implicit opportunity costs from revenue — a more complete picture than accounting profit alone.
Positive — business earns above its opportunity cost (supernormal profit)
- 1
Accounting profit
500,000 − 350,000 = 150,000Revenue minus all explicit (out-of-pocket) costs. - 2
Economic profit
150,000 − 80,000 = 70,000Subtracting opportunity cost reveals whether resources are deployed optimally.
How does this calculator work?
Economic Profit = Revenue − Explicit Costs − Opportunity Costs = Accounting Profit − Opportunity Cost. Positive means supernormal profit (above-normal returns); zero means normal profit (resources earn their market rate); negative means value is destroyed relative to alternatives.
Formula
How this is calculated
Accounting profit is what shows up on a firm's income statement: revenue minus all explicit monetary outlays (wages, rent, raw materials, taxes, depreciation). It measures cash profitability but ignores the cost of the owner's own resources.
Economic profit goes a step further by also subtracting the opportunity cost — the return the firm's resources (capital, the owner's time and skills, proprietary assets) could have earned in their next-best alternative use. If the owner's capital could earn 8% in a market index fund and instead earns 5% in the business, the business is consuming economic value even while showing an accounting profit. Economic profit = Accounting profit − Opportunity cost.
Three outcomes matter in economic theory: a positive economic profit (supernormal profit) attracts new competitors into the market; a zero economic profit (normal profit) means the firm earns exactly what its resources could earn elsewhere — a healthy long-run equilibrium in competitive markets; and a negative economic profit (subnormal profit) signals that resources would be better deployed elsewhere. In practice, estimating opportunity cost requires judgement: use the required rate of return on invested capital, or the salary the owner foregoes, or the return from the best alternative investment.
Frequently asked questions
Accounting profit subtracts only explicit (out-of-pocket) costs from revenue. Economic profit additionally subtracts implicit opportunity costs — what the same resources could earn elsewhere — giving a fuller picture of whether the business truly creates value.
Zero economic profit is called "normal profit." It means the firm earns exactly enough to cover all costs, including the opportunity cost of its resources. In competitive markets, entry of new firms tends to push economic profit toward zero in the long run.
Common approaches: use the expected return on the capital invested (e.g. 8–10% of equity invested), add the market salary the owner could earn elsewhere, or use the WACC of the business. Any reasonable estimate of the forgone alternative is a valid input.
Also known as
TG we-Calculate Editorial Team. (2026). Economic Profit Calculator [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/economic-profit-calculator
TG we-Calculate Editorial Team. "Economic Profit Calculator." TG we-Calculate. 2026. https://we-calculate.com/calculator/economic-profit-calculator.
TG we-Calculate Editorial Team, "Economic Profit Calculator," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/economic-profit-calculator
@misc{wecalculate_economic_profit_calculator, title = {Economic Profit Calculator}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/economic-profit-calculator}}, year = {2026}, note = {TG we-Calculate} }
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