Which of the following statements accurately describes the difference between accounting profit and economic profit in terms of explicit costs and financial health?

Accounting profit is the total revenue a company earns minus its explicit costs, which are the direct expenses like wages, rent, and materials. This type of profit shows how much money a business has left after paying its bills and is often what is reported on financial statements. On the other hand, economic profit goes a step further by also considering implicit costs, which are the opportunity costs of using resources in one way instead of another. For example, if a person starts a business instead of working at a job that pays $50,000 a year, that salary is an implicit cost. Therefore, while accounting profit might look good, economic profit provides a fuller picture of the company’s financial health by showing whether the business is truly generating more value than if resources were used differently.