Which one of these cost accounts for the difference between accounting income and economic value added?
A)depreciation
B)cost of capital
C)taxes
D)dividends

Question

Quizplus · Accepted Answer

The cost of capital, also known as the opportunity cost of capital, accounts for the difference between accounting income and economic value added. Economic value added measures the true profitability of a company by subtracting the cost of capital from its operating profit. Accounting income, on the other hand, only takes into account the revenue and expenses recorded in a company's financial statements. Therefore, the cost of capital is the key difference between these two measures of profitability.

Which One of These Cost Accounts for the Difference Between