Opportunity cost: Difference between revisions
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imported>Doug Williamson (Link with Float page.) |
imported>Doug Williamson (Link with Cost page.) |
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== See also == | == See also == | ||
* [[Cost]] | |||
* [[Cost of capital]] | * [[Cost of capital]] | ||
* [[Float]] | * [[Float]] | ||
Revision as of 16:53, 30 July 2017
1.
The expected return that is foregone by investing in a project, rather than in the next best use of capital or other resources.
It is the opportunity cost of capital and other resources that is the relevant economic measure for financial decision making purposes.
Opportunity cost is an important and powerful concept in cash management.
Examples of opportunity costs include leaving cash in a non-interest bearing bank account.
The organisation loses the opportunity to pay down debt (and save interest) or to invest the cash elsewhere (and earn interest).
2.
The same as 'opportunity loss'.
