Corporate Profit


DEFINITION of 'Corporate Profit'

A statistic reported quarterly by the Bureau of Economic Analysis (BEA) that summarizes the net income of corporations in the National Income and Product Accounts (NIPA). Corporate profits is an economic indicator that calculates net income using several different measures:

  • Profits From Current Production: Net income with inventory replacement and differences in income tax and income statement depreciation taken into consideration. Also known as operating or economic profits.
  • Book Profits: Net income less inventory and depreciation adjustments.
  • After-Tax Profits: Book profits after taxes are subtracted. After-tax profits are believed to be the most relevant number.

Because the BEA corporate profits number is derived from the NIPA (dependent on GDP/GNP growth), these profit numbers are often quite different from profit statements released by individual companies.

BREAKING DOWN 'Corporate Profit'

Because corporate profits represent a corporation's income, they are one of the most important things to look at when investing. Increasing profits means either increased corporate spending, growth in retained earnings or increased dividend payments to shareholders. All are good signs to an investor.

Investors may also use this number in a comparative analysis. If an individual company's profits are increasing while the overall corporate profits are decreasing, it could signal strength in the company. Alternatively, if an investor notices that an individual company's profits are decreasing while overall corporate profits are increasing, a fundamental problem may exist.

  1. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Economic Growth Rate

    A measure of economic growth from one period to another in percentage ...
  4. Profit

    A financial benefit that is realized when the amount of revenue ...
  5. Economic Growth

    An increase in the capacity of an economy to produce goods and ...
  6. Corporate Finance

    1) The financial activities related to running a corporation. ...
Related Articles
  1. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  2. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  3. Active Trading

    Introduction To Stationary And Non-Stationary Processes

    What to know about stationary and non-stationary processes before you try to model or forecast.
  4. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  5. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  6. Economics

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
  7. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  8. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  9. Term

    What Is Financial Performance?

    Financial performance measures a firm’s ability to generate profits through the use of its assets.
  10. Economics

    5 Ways to Create Residual Income

    Here are 5 ways through which you can create residual streams of income.
  1. What is GDP and why is it so important to investors?

    The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents ... Read Full Answer >>
  2. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  3. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>
  4. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>
  5. Do dividends go on the balance sheet?

    The only account recorded on the balance sheet, when dividends are declared and before they are paid out to a company's shareholders, ... Read Full Answer >>
  6. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!