Finance Formulas / July 18, 2018 / Luz Tyson
Economic profit includes the opportunity costs a company loses or gains by making a decision to pursue one avenue towards revenue, thus passing by a different opportunity which also might have produced revenue. A firm can have a large accounting profit, but no economic profit.
The personal debtequity ratio is often used in financing, as when an individual or small business is applying for a loan. This form of DE essentially measures the dollar amount of debt an individual has for each dollar of equity they have. DE is very important to a lender when considering a candidate for a loan, as it can greatly contribute to the lender’s confidence (or lack thereof) in the candidate’s financial stability.
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