Originally Posted by wakefinance
You can write a negative number in a row for profit, but when you describe that number using words you either write or say “loss."
It doesn't matter how you say it verbally. Mathematically, a loss is written as a negative in the profit column. Standard GAAP.
Originally Posted by wstanich
I know this has been asked already, but then how do GAAP principles and industry standards say we should deal with this calculation if the net profit is zero (for example, if it is a new industry in which all competitors are in the concept phase only and have not reported any income or expenses)? Or if the net profit of the industry is negative, such as occurs during an economic downturn, do companies that make a profit report that they have earned a negative percentage of the industry's net profit, which is negative?
Just to be clear, I do not pretend to be an accountant.
In general, GAAP doesn't tell you WHAT to do, but rather it tells you how to do it. The goal of GAAP is to have consistent principles and consistent accounting schemes.
What GAAP requires is that if you are adding profits to get a total, you add the positive AND the negative profits and the total is the mathematical sum of all the pluses and minuses. GAAP would specifically NOT allow you to simply ignore some of the numbers because they're negative.
Now, to be clear, GAAP would not have specific guidelines for adding up profits in a market. But if you want to define a "Total Profits", GAAP would tell you how to do that.
And once you've defined "Total profits", percentages are simple third grade math - % = 100 * part / Total