Scenario 9.2 Consider a Publicly Held Firm (One Whose Stock Shares Are

question 110

Multiple Choice

Scenario 9.2
Consider a publicly held firm (one whose stock shares are traded on the stock exchange) that earned revenue worth $350 million and incurred land, labor, and debt costs worth $320 million. The stockholders who have invested a total of $100 million in this firm could have earned 10 percent return on other comparable investments.
-Accountants do not often report economic profits on income statements and balance sheets because:

• A)economic profits are exactly the same as accounting profits, and thus they do not need to be broken out in 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.