Basing management decisions on economic profit (e.g.Economic Value Added)rather than accounting profit is more important for companies with few fixed assets (such as software companies and consulting firms)than capital-intensive companies such as chemical companies and vehicle manufacturers.

Question

Quizplus · Accepted Answer

Economic profit, which accounts for the cost of capital, is important for all companies, including capital-intensive ones, as it provides a more accurate measure of true profitability and value creation than accounting profit, which does not consider the cost of capital.

Basing Management Decisions on Economic Profit (E