The reason accountants do not often report economic profits on income statements and balance sheets is:
A)economic profits are exactly the same as accounting profits,and thus they do not need to be broken out on financial statements.
B)the cost of capital,while easy to measure,is very difficult to report.
C)it might make some firms look as though they possessed an unfair competitive advantage over other firms.
D)the cost of equity capital is very difficult to measure,and opportunity costs vary from investor to investor.
E)the concept of economic profit is not firmly established in economic theory.

Question

Quizplus · Accepted Answer

Economic profits take into account the opportunity cost of the use of resources, including the cost of equity capital, which is difficult to measure and varies from investor to investor. Therefore, it is not commonly reported on financial statements, which focus on accounting profits that only consider explicit costs.

The Reason Accountants Do Not Often Report Economic Profits on Income