Investor Glossary-unrealized profitInvestor Glossary-unrealized profitInvestor Glossary-unrealized profitInvestor Glossary-unrealized profitInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Unrealized Profit

The HTML to link to this page
 

An unrealized profit is a potential profit that has not yet been effected, i.e., a paper profit. Suppose an investor buys 25 shares of stock at $2 each on October 14. On October 22, the price is $3 per share. The unrealized profit is 25 x ($3-$2), or $25. An unrealized profit is ordinarily not taxed until the stock is sold and the profit realized. From the standpoint of investor psychology, though, an unrealized profit can pose problems: if the shares subsequently decline, some investors won't sell the stock until the price is again $3 and they have the same unrealized profit. In this way, an unrealized profit penalizes investors who refuse to cut their losses. However, an unrealized profit ordinarily poses fewer issues for auditors of financial statements than an unrealized loss. Because of the principle of conservatism, an unrealized profit on, say, land, won't be recorded -- the land continues to be carried at historical cost. Note that unrealized profit is often called an unrealized gain.



Rate this unrealized profit definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: reverse mortgage, deferred revenue, 144a, current ratio, required rate of return, option premium, implied volatility, class C shares, ex-dividend, inflation, per diem, balance sheet, in escrow, cancelled check, margin rate, FICO score, stock split, 1035 exchange, average price per share, retained earnings, real GDP, 1031 exchange, Zero Cost Collar, ex-dividend date, 401a, LIBOR, open position, annual return, stock market close, deferred tax, minority interest, covered put, irrevocable trust, VIX, FTSE, liquidity ratio, wholly-owned subsidiary, APR, diluted share, limit order, command economy, debt service coverage, quality assurance, EBITDA, Key Rate Duration, phantom income, risk management, labor relations, dividends payable


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use