- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 2. Economic Profit vs. Accounting Profit
CFA Practice Question
Which relationship has a positive effect on a firm's market value of equity?
B. accounting profit = normal profit
C. accounting profit < normal profit
A. accounting profit > normal profit
B. accounting profit = normal profit
C. accounting profit < normal profit
Correct Answer: A
In this case, the economic profit > 0.
User Contributed Comments 3
| User | Comment |
|---|---|
| cumc | I DONT UNDERSTAND |
| weebe | accounting profit = economic profit + normal profit Only in Option A, will be economic profit be more than zero Option B economic profit is zero and in Option C it's negative. |
| jzty | If the economic profit is >0, it means the company has a potential to make more money. |