Final answer:
The correct answer to why two companies with identical operations can have different net incomes is mostly (c) They use different accounting methods. Accounting profit differences arise from explicit costs management, while economic profit considers both explicit and implicit costs. However, different revenue streams, expenses, and management practices can also be factors.
Step-by-step explanation:
Two companies having identical operations but different net income could be due to several factors. It's crucial to understand that profit is the difference between revenues and costs. Accounting profit considers only explicit costs, which are direct, out-of-pocket expenses, whereas economic profit includes both explicit and implicit costs, the latter being indirect, non-cash expenses or opportunity costs.
The correct option here could be (c) They use different accounting methods. Different accounting methods can lead to different profit calculations. For example, one company may use cash basis accounting while the other uses accrual basis accounting, affecting the timing of revenue and expense recognition. Alternatively, differences in how depreciation is calculated or how inventory is valued can also lead to different net incomes.
However, other options could also influence net income:
- Different revenue streams (option a) suggest that while operations appear identical, the sources and types of revenue may vary.
- Expenses are different (option b) could mean one company has managed to lower its costs, affecting the bottom line.
- Different management practices (option d) may impact operational efficiency and cost management.