Financial analysis : Question 8
Could you explain the notion of normative?

In finance, normative means recurrent, in the normal course of business, without any exceptional events. A normative margin is the sort of margin a company can expect to make on a regular basis. A normative profit is the profit from which the exceptional items have been deducted.

A company often uses normative profits for presenting better results than its current profits if these have been impacted by an exceptional event which would penalise it. Always make sure the truth has not been embellished without any real basis, just to create a good impression!

For more information, see chapter 9 of the Vernimmen.