What is economic profit in SAP FIN-SEM - Strategic Enterprise Management?

SAP Term: economic profit

• Component: FIN-SEM

• Component Name: Strategic Enterprise Management

• Description: A single-period key figure that measures the return on an investment.

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• Key Concepts: 
  Economic profit is a measure of profitability that takes into account the opportunity cost of capital. It is calculated by subtracting the cost of capital from the net operating profit. This measure is used to assess the performance of a company in terms of its ability to generate returns above and beyond what could be earned by investing in a risk-free asset.
  
  How to use it: 
  Economic profit can be used to evaluate the performance of a company over time. It can also be used to compare the performance of different companies in the same industry. Additionally, economic profit can be used to assess the effectiveness of strategic decisions made by management.
  
  Tips & Tricks: 
  When calculating economic profit, it is important to consider all costs associated with capital, including interest payments, taxes, and depreciation. Additionally, it is important to consider the risk associated with the investment when calculating economic profit.
  
  Related Information: 
  Economic profit is closely related to economic value added (EVA), which is a measure of how much value a company has created for its shareholders. EVA takes into account both the cost of capital and the risk associated with the investment. Additionally, economic profit can be used in conjunction with other financial metrics such as return on equity (ROE) and return on assets (ROA) to assess a company's overall performance.