Difference between revisions of "Opportunity cost"
(Created page with "Opportunity cost is a cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sol...") |
|||
| (4 intermediate revisions by 3 users not shown) | |||
| Line 5: | Line 5: | ||
According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | ||
:[[Opportunity cost]]. A cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project. | :[[Opportunity cost]]. A cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project. | ||
| + | According to [[Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition)]], | ||
| + | :[[Opportunity cost]]. The rate of return you could earn on an alternative investment of similar risk. | ||
| + | :[[Opportunity cost]]s. The best return that could be earned on assets the firm already owns if those assets are not used for the new project. | ||
| + | According to [[Principles of Economics by Timothy Taylor (3rd edition)]], | ||
| + | :[[Opportunity cost]]. Whatever must be given up to obtain something that is desired. | ||
| + | According to [[Cost Accounting by Horngren, Datar, Rajan (14th edition)]], | ||
| + | :[[Opportunity cost]]. The contribution to operating income that is forgone or rejected by not using a limited resource in its next-best alternative use. | ||
| + | According to [[Managerial Accounting by Braun, Tietz (5th edition)]], | ||
| + | :[[Opportunity cost]]. The benefit forgone by choosing a particular alternative course of action. | ||
==Related concepts== | ==Related concepts== | ||
| Line 12: | Line 21: | ||
*[[Introduction to Financial Management]]. | *[[Introduction to Financial Management]]. | ||
| − | [[Category: Financial Management]][[Category: Articles]] | + | [[Category: Financial Management]][[Category: Economics]][[Category: Articles]][[Category: Accounting]] |
Latest revision as of 13:07, 15 July 2020
Opportunity cost is a cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Opportunity cost. A cash flow that a firm must forgo in order to accept a project. For example, if the project requires the use of a building that could otherwise be sold, then the market value of the building is an opportunity cost of the project.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Opportunity cost. The rate of return you could earn on an alternative investment of similar risk.
- Opportunity costs. The best return that could be earned on assets the firm already owns if those assets are not used for the new project.
According to Principles of Economics by Timothy Taylor (3rd edition),
- Opportunity cost. Whatever must be given up to obtain something that is desired.
According to Cost Accounting by Horngren, Datar, Rajan (14th edition),
- Opportunity cost. The contribution to operating income that is forgone or rejected by not using a limited resource in its next-best alternative use.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Opportunity cost. The benefit forgone by choosing a particular alternative course of action.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
