28/08/2026
**Your business may be making a profit—and still destroying your wealth.**
🟢 Accounting profit alone does not reveal whether your business is creating real value.
🟢 Economic profit considers the return you could have earned by investing your money elsewhere.
🟢 Every investment has a cost, known as the **cost of capital**.
🟢 This cost should reflect the investment risk, financing cost, and the return expected by investors.
🟢 When both debt and equity are used, we calculate the **Weighted Average Cost of Capital (WACC).**
🟢 **Economic Profit = NOPAT − (Invested Capital × WACC)**
🟢 A positive economic profit means the business is creating value.
🟢 A negative economic profit means that—even if accounting profit exists—the return is not sufficient to cover the cost of the capital invested.
**So, do not ask only, “Did my business make a profit?” Ask, “Did it earn enough to justify the money, risk, and effort invested?”**
