18 Methods of Valuation · 18.1 Methods of valuation

18.1.7 Profits method

The profits (accounts) method values a trading property — hotel, cinema, petrol pump, licensed premises — from the business it earns: from the net profit, deduct a fair share for the operator; the balance is the rent the property can bear, which is then capitalised.

  • MPSC ATP
  • Standard level
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Key terms

  • profits method
  • accounts method
  • trading property
  • hotel
  • cinema
  • petrol pump
  • licensed premises
  • gross receipts
  • purchases
  • working expenses
  • divisible balance
  • tenant's share
  • interest on tenant's capital
  • remuneration
  • rental value
  • goodwill
  • monopoly
  • licence

What this note covers

  1. Core factsFoundation
  2. ExplainedStandard
  3. DeeperAdvanced
  4. Mains writingMains writing
  5. Common trapsFoundation
  6. Quick revisionFoundation

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