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What is Economic vs Accounting Profit Explained about?
Accounting profit only considers explicit costs like materials and wages based on GAAP, while economic profit also includes implicit opportunity costs like use of company resources. Specifically, accounting profit is used for taxes and financial reports while economic profit better measures total company value and performance over time by incorporating these additional implicit costs into the calculation. For a company with $150,000 revenue and $50,000 explicit costs, its accounting profit would be $100,000
- Author
- Prajwal Agrawal
- Language
- EN