Question

Can you have value creation without economic profits? Explain. Can you have economic profits without value creation? Explain.

Answer 1

Regarding the first question whether can we have value creation without economic profit

• Yes without EP we can still have value creation
• EP is just a base that will give clear idea of making value creation
• It is not a fact that we cannot have value creation if there is no EP
• create value depends on its cost position
• It also depends on the benefits over the competitors

Can we have Economic profit without value creation?

• The truth is no we cannot have economic profit without the value creation
• The economic profit and value creations are completely correlated
• Economic profit earned by a firm depends on the economic value created
• Value creation occurs with respect to particular customers
• With better value creation we can improve the EP

First part

Business begins with value creation first
Basically the value creation is done to attain the economic profit
value is created through work and it can be creative work or some physical work
The fact is that all work wont be creating a value though
The business aim is to create a value and reach it to the customers and attain some profit from it
The value of products and services today is based more and more on creativity
Lets consider an example that there is a product which has created and assigned a value
Later on it may or may not gain profit
The profit depends on the fact that whether it is sold in an effective manner
Hence there value creation without EP

part 2
The statement clearly is that regarding the importance of EP
The above Points listed in the part one describes that a value is created such that it may gain some profit over the product
The point clearly states that how correlated the profit is with value creation
Without a value created how could we possibly have EP
The logical reason is that we cannot sell a product without value creation
Hence how could we achieve EP
So we can not have EP without the Value Creation

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