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


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use