Overview
Understanding the difference between accounting profit and economic profit is essential for students and business professionals alike. Accounting profit is calculated by subtracting explicit costs from total revenue, providing a straightforward view of a company's profitability. In contrast, economi...
Key Terms
Example: Wages paid to employees.
Example: The income foregone from not working elsewhere.
Example: Choosing to invest in a business instead of saving.
Example: Selling 100 units at $10 each gives $1,000 total revenue.
Example: A profit margin of 20% means $0.20 profit for every dollar earned.
Example: Selling 50 units at $20 each with $1,000 costs.
Related Topics
Cost Accounting
Focuses on capturing all costs associated with production.
intermediateFinancial Analysis
Evaluates a company's financial health and performance.
intermediateManagerial Economics
Applies economic theory to business management.
advancedInvestment Analysis
Assesses the viability of investment opportunities.
intermediateKey Concepts
Explicit CostsImplicit CostsOpportunity CostProfit Measurement