- 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
The difference between economic profit and accounting profit is equal to ______.
A. implicit and explicit costs
B. implicit and explicit revenues
C. implicit revenues minus implicit costs
Explanation: Economic profit includes all revenues and costs, even those that are difficult to measure, while accounting profit includes only revenues and costs that are readily observable.
User Contributed Comments 6
| User | Comment |
|---|---|
| cbb1 | What are implicit revenues? |
| Peter | I guess it can be a free lunch if you work in a canteen? |
| surob | Normal profit, your salary if you worked somewhere |
| Mariecfa | Implicit Revenues: ("psychic") revenues; for example, a person may particularly enjoy "being his own boss". |
| Mariecfa | Example of an implicit revenue: The store owner particularly enjoys socializing with the customers; this aspect of the business provides a comfort to the owner which is worth $2,000 a month to her. |
| jaker | Kind of like intangibles? |