Accounting Profits vs. Economic Profits
For a U.S. GAAP company, which of the following statements best describes the relationship between the amount of accounting profits and the amount of economic profits of a company?
A. Accounting profits and economic profits are similar.
B. Economic profits are greater than accounting profits.
C. Accounting profits are greater than economic profits.
D. No systematic relationship exists between accounting and economic profits.
The answer is C.
I don’t understand why accounting profs are larger than economic profs. |