How does economic profit differ from net income? a. the major difference is that

Question

How does economic profit differ from net income?

a. 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 cpitalizing 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 net income includes a capital charge, that is, a cost of using all capital. in contrast, economic profit includes a charge for using equity capital. some measure 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

Explanation / Answer

The economic profit is nothing but adding value to the economic and net income is the income to the organization therefore the vslue added to tjhe organization will add vslue to the GDP of the country and to check the economic value added therefore thae answer is 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

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