Why should managers mainly focus on economic profits?

Managers should primarily focus on economic profits because they provide a clearer picture of a company's true financial health by accounting for opportunity costs and the cost of capital. This focus helps ensure that resources are allocated efficiently and investments are yielding returns that exceed the minimum required return. Additionally, prioritizing economic profits can drive long-term sustainability and competitiveness, as it encourages strategic decision-making that enhances overall value creation for stakeholders.