Answer to Question #269429 in Economics for OK MOLEFE

Question

Eskom is facing increasing debt of close to R500 billion, and Accountants will comment that they are not making a normal profit. As an economist, you could argue that Eskom is also not making an economic profit. Elaborate on the difference between accounting and economic profit and provide suggestions of how an Eskom can ensure an economic and accounting profit

Answer 1

Accounting profit is the net income for a company, which is revenue minus expenses. Economic profit is similar to accounting profit, but it includes opportunity costs. It includes explicit and implicit costs, which are implied or imputed costs.