- 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 negative effect on a firm's market value of equity?
A. economic profit < normal profit
B. economic profit < accounting profit
C. normal profit > accounting profit
Explanation: In this case, the economic profit < 0.
User Contributed Comments 2
| User | Comment |
|---|---|
| gradyf | Can someone explain this? |
| MariaDunet | EP=AP-NP, so in case AP<NP, EP is definitely <0, which is a worse scenario of all above |