Asked by Big Citric's World on May 03, 2024
Verified
A key difference between accountants and economists is their different treatment of the cost of capital. Does this cause an accountant's estimate of total costs to be higher or lower than an economist's estimate? Explain.
Cost of Capital
The cost of capital represents the return rate that investors expect of a company to generate from its projects to be worth the risk of the investment.
Accountants
Professionals who manage and examine financial records for individuals, companies, or organizations.
Economists
Professionals who study the production, distribution, and consumption of goods and services, analyzing how economies work and how economic agents interact.
- Distinguish between explicit and implicit costs and their relevance to economic and accounting profits.
Verified Answer
ZK
Zybrea KnightMay 07, 2024
Final Answer :
An accountant would not include the forgone interest income that the money could have earned elsewhere if it had not been invested in the business. Therefore, an accountant's estimate of total cost will be less than an economist's.
Learning Objectives
- Distinguish between explicit and implicit costs and their relevance to economic and accounting profits.