Question

Problem set 1.17 Is it possible for a firm to simultaneously earn above normal economic returns and below average accounting returns? What about below normal economic returns and above average accounting returns? Why or why not? If this can occur, which measure of performance is more reliable: economic performance or accounting performance? Explain.

Answer 1

Answer:

1. In the event that we look carefully, we will locate a nearby connection among's bookkeeping and economies measures for picking up the upper hand.
2. The organizations can pick up the better than expected bookkeeping execution and in the meantime looking underneath ordinary monetary execution.
3. The comparative circumstance can exist for beneath normal bookkeeping execution or more normal financial execution.
4. In the primary case, the firm can't create the income for the expense of capital yet it can gain the above business normal bookkeeping execution.
5. In the last case, the expense of capital for the firm is very low and hence it is procuring more than this cost which is underneath the business normal.