Windfall Profits

DEFINITION of 'Windfall Profits'

Huge profits that occur unexpectedly due to fortuitous circumstances. Such profits are generally well above historical norms and may occur due to several factors - such as a price spike or supply shortage - that are either temporary in nature or may be longer lasting. Windfall profits are generally reaped by an entire industry sector, but can also be reaped by an individual company.

BREAKING DOWN 'Windfall Profits'

In recent years, surging prices for crude oil have led to record profits for many energy companies, leading to demands from politicians to deem them as windfall profits and tax them accordingly. Needless to say, most companies that have made windfall profits strongly resist attempts to pay additional taxes on them. Arguments made by such companies are that record profits lead to record taxes payable by them in any case, as well as the fact that windfall profits are likely to be only temporary in nature.

RELATED TERMS
  1. Windfall Tax

    A tax levied by governments against certain industries when economic ...
  2. Windfall Shares

    Shares given for free to insiders of a society, a firm or a company ...
  3. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  4. Underlying Profit

    A term used to describe the actual reflection of a company's ...
  5. Profit Taking

    The act of selling a security in order to lock in gains after ...
  6. Profit Center

    A branch or division of a company that is accounted for on a ...
Related Articles
  1. Financial Advisors

    Tips For Managing A Cash Windfall

    Many of us fantasize about winning a big lottery jackpot. Let’s say that actually happened? What would you do with the money? How would you manage it?
  2. Personal Finance

    Managing a Cash Windfall

    Cash windfalls are more common than you think. Here's what to do if you receive one.
  3. Economics

    What is Profit Before Tax?

    Profit before tax measures a company’s profits before it pays corporate income tax.
  4. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  5. Markets

    Profitability Indicator Ratios: Profit Margin Analysis

    By Richard Loth (Contact | Biography)In the income statement, there are four levels of profit or profit margins - gross profit, operating profit, pretax profit and net profit. The term "margin" ...
  6. Entrepreneurship

    Why, How, Where and When Entrepreneurs Make Money

    Why, how, where and when do entrepreneurs make money? Eleven stages or "terms" that entrepreneurs and their ventures go through on the road to success.
  7. Economics

    Calculating Economic Profit

    Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs.
  8. Term

    The Difference Between Gross and Net Profit Margin

    To calculate gross profit margin, subtract the cost of goods sold from a company’s revenue; then divide by revenue.
  9. Investing Basics

    Profit Metrics: Gross, Operating & Net Profits

    In addition to net profit, most analysts look at a company’s gross profit and operating profit to gauge performance.
  10. Markets

    Fundamental Analysis: The Income Statement

    By Ben McClureThe income statement is basically the first financial statement you will come across in an annual report or quarterly Securities And Exchange Commission (SEC) filing. It also contains ...
RELATED FAQS
  1. What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between ... Read Answer >>
  2. What is more important for a business, profitability or growth?

    Discover how both profitability and growth are important for a company, and learn how corporate profitability and growth ... Read Answer >>
  3. What does operating profit margin tell a business owner?

    Learn about the operating profit margin, how it is calculated and what it says to both business owners and investors about ... Read Answer >>
  4. What is the formula for calculating profit margins?

    Learn about gross, operating and net profit margins, how each is calculated and how they are used by businesses and investors ... Read Answer >>
  5. What is the difference between gross profit margin and net profit margin?

    Understand the difference between the two profitability measures, gross profit margin and net profit margin, and how to calculate ... Read Answer >>
  6. Should I look at a company's operating profit or net profit?

    Explore the ways in which investors and market analysts use a company's operating profit and net profit margins for equity ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center