How does interest relate to profit specifically by Dr. Robert Murphy

Question 80 / 96: *How does interest relate to profit, specifically the difference between accounting and economic profit?

Answer:

In everyday language, and even in terms of standard accounting,

"profit" refers to the excess of money receipts over money

expenditures. But this figure includes the interest payment

on the invested capital in the business. In other words, out of

the gross or accounting profit we need to subtract the interest

payment reflecting the fact that the investors' capital was tied

up for a certain period when it could have been "at work" in another project.

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https://www.jobilize.com/capitalism-the-market-economy-by-dr-robert-murphy-mises

Capitalism: The Market Economy

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Dr.Robert MurphyAssociated Scholar

Mises Institute

USA

Attribution: Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY

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