Lost or diminished profits can be categorized as either a business damage claim or an economic damage claim. A business damage claim involves cases in which the business experiences diminished profits generally as a result of an alleged action against the business. Economic damage claims involves the calculation of the amount of future lost profits or the lost value of the business.
Calculating lost profits involves forecasting income cash flows and converting them to present value. Damages are usually the difference between what the plaintiff would have expected to receive had the alleged wrongful act never been committed and the actual profits that the business did receive. This calculation includes looking at historical profits as well as future projections.