What Does Normal Profit Mean?


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amber Jhon answered
Basically the ultimate goal of all businesses is to get profit. The term abnormal profit is widely used by the businesses to show the profit much more than the expectations of the company. However, normal profit is the net income which the company should retain to meet all of its expenditures and then a part of it can be stored as reserves in the retained earnings.

For understanding the concept of normal profit, you should understand the types of profits which include no profit, normal profit and abnormal profit. I have already explained the abnormal profit and zero profit comes on the breakeven point of the company. Breakeven point is achieved when profit is zero and total revenue is equal to total cost.

So, if the profit of the company is neither too large like abnormal profit nor too small then it is known as normal profit.

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