If Accounting Profits for a Firm Are 20% of Output

question 29

Multiple Choice

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?

• A) 6% of output
• B) 10% of output
• C) 12% of output
• D) 8% of output

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Definitions:

Invoice Price

The price listed on an invoice for purchased goods or services, before any discounts, allowances, or additional charges are applied.

Net Realizable Value

Net Realizable Value is the estimated selling price of goods minus the estimated cost of completion and sales expenses.

Accounts Receivable

Unpaid amounts by customers for goods or services already supplied by a company.

Write Off

The accounting action of declaring that an asset is partially or totally worthless, reducing its value to zero in the books.