How does economic profit differ from net income

Assignment Help Managerial Accounting
Reference no: EM13771393

How does economic profit differ from net income?

A. The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

B. The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

c. The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

D. The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

Reference no: EM13771393

Describe the discretionary fiscal policies

shows that increased government purchases, with taxes held constant, can eliminate a recessionary gap. How could a tax cut achieve the same result - Describe the discretiona

How much of total sales revenue is expected to be paid

How much of the total sales revenue is expected to be paid with cash and how many customer transaction does the company expect in January?

Determine the cost of jobs

Evaluate the total cost of the work in process inventory on January 31. Determine the cost of jobs completed during January, and show the proper journal entry to reflect job c

Needham company job costing system-calculate operating

Needham Company uses normal costing in its job-costing system. Partially completed T-accounts and additional information for Needham for 2008 are as follows:

The market rate of interest for similar bonds is 9%.

On January 1 of Year 1, Drum Line Airways issued $3,750,000 of par value bonds for $3,440,000. The bonds pay interest semiannually on January 1 and July 1. The contract r

Calculated cost for an equivalent unit of production

Zing Inc. calculated cost for an equivalent unit of production using both the weighted-average and the FIFO methods.Data for July:Work-in-process inventory, July 1 (36,000 uni

Computing contribution margin-break even point

Determine the contribution margin for this practice. Determine the accounting break even point in the terms of number of Enrollees. Determine the economic break even point in

Variety of computer-related products

8.63 A retailer of computing products sells a variety of computer-related products. One of his most popular products is an HP laser printer. The average weekly demand is 200

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd