Underlying Profit

AAA

DEFINITION of 'Underlying Profit'

A term used to describe the actual reflection of a company's profit. The underlying profit is not the required accounting profit that is recorded on financial statements and documents mandatory to follow preset rules and regulations. This number is calculated by the company to show what they believe to be an accurate reading of the company's profit position and may exclude one time charges or infrequent events.

INVESTOPEDIA EXPLAINS 'Underlying Profit'

The calculation is different for every company in that they begin with the accounting profit, and make adjustments as they see fit. In recent years, it has been argued that there should be some kind of guideline in place so that the reporting of underlying profits can be compared between companies.

RELATED TERMS
  1. Net Operating Income - NOI

    A company's operating income after operating expenses are deducted, ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  3. Accounting Method

    The method by which income and expenses are reported for taxation ...
  4. Profit

    A financial benefit that is realized when the amount of revenue ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Income Statement

    A financial statement that measures a company's financial performance ...
RELATED FAQS
  1. How do interest rate changes affect the profitability of the banking sector?

    The banking sector's profitability increases with interest rate hikes. Institutions in the banking sector such as retail ... Read Full Answer >>
  2. 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 >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  5. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  6. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
Related Articles
  1. Markets

    Material Adverse Effect A Warning Sign For Stocks

    Learn what this phrase means and how to spot it in a company's financial statements.
  2. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  3. Investing Basics

    The Importance Of Corporate Transparency

    Clear and honest financial statements not only reflect value, they also help ensure it.
  4. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  5. Options & Futures

    An Investor's Checklist To Financial Footnotes

    Footnotes to the financial statements contain very important information, but reading them takes skill.
  6. Fundamental Analysis

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  7. Investing

    Is It Time To Buy Commodities?

    Despite the news, the Athens Stock Exchange is down less than 5 percent year-to-date, while the Shanghai Composite remains up more than 10 percent.
  8. Fundamental Analysis

    Burger King and Tim Hortons Are Better Together

    In August 2014, 3G Capital announced that it was merging Burger King with Canadian coffee chain Tim Hortons to form Restaurant Brands International.
  9. Fundamental Analysis

    Macau: Not Your Father's Gambling Destination

    Macau has given Las Vegas casinos a run for their money, but what's behind the scenes? Here's an overview of Macau's gambling industry.
  10. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
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!