The "bottom line" for the operations component of the model is gross margin, the gross revenue minus all of the operating costs, the amount available to pay for the ownership costs. The ownership "bottom line" is economic profit,
the gross margin minus the value of all of the ownership resources (i.e., the management, capital and land resources) and an estimate of the riskiness of theenterprise. Most smaller-scale farmers do not
consider the full value of their labor, management and owner equity. They often think of their "profit" simply as the residual of their farming effort, what is left over for family living expenses. However, in calculating the economic profit, we must consider the value of all productive resources.The return to the farmer is the value to his labor, management, and owner equity plus the economic profit. (Unfortunately, economic profit may also be negative, in which case the return to the farmer would not be as great as the total value of the
productive resources.) Economic profit is the best measure of true farm profitability because it includes all costs, not simply cash costs, as does "accounting profit," a more commonly used measure of profitability. In the long run we would expect economic profit to equal zero because all "out-of-pocket" expenses will have been paid and all productive resources, such as land, labor, management, and the owner's capital investment, will have received a return at least equal to their value. We would therefore expect significantly positive economic profit ability to attract other producers into the banana industry, and negative economic profitability to encourage producers to exit the industry.