Adjusted Profit
Adjusted profit refers to the net profit of a company after deducting non-recurring gains and losses and other special items, reflecting the company's operating performance and true profitability. Non-recurring gains and losses and other special items include but are not limited to: government subsidies, non-recurring asset impairment losses, restructuring costs, etc. Adjusted profit is one of the important indicators for investors to judge the financial condition and profitability of a company.
Adjusted Profit
Definition
Adjusted profit refers to the net profit of a company after excluding non-recurring gains and losses and other special items. It reflects the company's operating performance and true profitability. Non-recurring gains and losses and other special items include, but are not limited to, government subsidies, non-recurring asset impairment losses, restructuring costs, etc. Adjusted profit is an important indicator for investors to assess a company's financial condition and profitability.
Origin
The concept of adjusted profit originated in the late 20th century. As the complexity of corporate financial reporting increased, investors and analysts needed a more accurate indicator to reflect the core operating conditions of a company. Especially in the context of economic fluctuations and frequent corporate restructurings, traditional net profit indicators might be affected by one-time items, thus failing to truly reflect the company's profitability.
Categories and Characteristics
Adjusted profit mainly includes the following categories:
- Excluding non-recurring gains and losses: such as government subsidies, fines, donations, etc.
- Excluding special items: such as asset impairment losses, restructuring costs, litigation costs, etc.
These adjustments allow adjusted profit to more accurately reflect the company's daily operating conditions, avoiding distortions caused by one-time items.
Specific Cases
Case 1: A company reported a net profit of 50 million yuan in 2023, but this included a 20 million yuan government subsidy and a 10 million yuan asset impairment loss. The adjusted profit is 50 million yuan - 20 million yuan + 10 million yuan = 40 million yuan, which better reflects the company's actual operating conditions.
Case 2: Another company underwent a large-scale restructuring in 2023, reporting a net profit of 30 million yuan, but restructuring costs amounted to 15 million yuan. The adjusted profit is 30 million yuan + 15 million yuan = 45 million yuan, showing the company's profitability after restructuring.
Common Questions
Q1: Why is adjusted profit more important than net profit?
A1: Adjusted profit excludes non-recurring gains and losses and special items, better reflecting the company's core operating conditions and true profitability.
Q2: Is adjusted profit completely reliable?
A2: While adjusted profit provides a clearer view of profitability, it should still be analyzed in conjunction with other financial indicators and the company's background.
