Does a negative accounting profit imply a negative or zero economic profit?

No, only if we keep the purchasing power one the monetary unit constant.

If the purchasing power of money is increasing (we have an fall of prices in general), we can have an negative accounting profit but an positive economic profit (Accounting profit – Interest – change in the purchasing power of money).

An example is that an company paid 100 dollars for the factors plus 10% interest that will be paid in the end of the period, in the final period the total cost will be 110, if the company had an receipt of 105 this can be saw as a loss, however when accounting for the true profit the company compares the current, or better saying immediate past and very short run future, prices with the receipt. So if the machinery and works and etc., are now costing 70 and even without adjusting the interest to expected fall in the future prices, he will now that his economic profit is 25 (70 for the prices of the factors plus 10 from the previous interest contract).

The economic profit is the liquid real income of the company at the end of the given time.

The opposite is true, positive accounting profits can be negative economic profits.

Show more







Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10