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Implicit Cost

A cost that is represented by lost opportunity in the

use of a company's own resources, excluding cash.
The implicit cost for a firm can be thought of as the
opportunity cost related to undertaking a certain
project or decision, such as the loss of interest
income on funds, or depreciation of machinery used
for a capital project.
Implicit costs can also be thought of as intangible
costs that are not easily accounted for. For example,
the time and effort that an owner puts into the
maintenance of the company, rather than working on
expansion, can be viewed as an implicit cost of
running the business.

Explicit Cost
A business expense that is easily identified and
accounted for. Explicit costs represent clear,
obvious cash outflows from a business that
reduce its bottom-line profitability. This
contrasts with less-tangible expenses such as
goodwill amortization, which are not as clear
effects costs
on a business's
of explicit
would be items
such as wage
expense, rent or lease costs, and
the cost of materials that go into the
production of goods. With these expenses, it is
easy to see the source of the cash outflow and
the business activities to which the expense is

Cost of Capital
The cost of funds used for financing a business. Cost
of capital depends on the mode of financing used it
refers to the cost of equity if the business is financed
solely through equity, or to the cost of debt if it is
financed solely through debt. Many companies use a
combination of debt and equity to finance their
businesses, and for such companies, their overall cost
of capital is derived from a weighted average of all
capital sources, widely known as the weighted
average cost of capital (WACC). Since the cost of
capital represents a hurdle rate that a company must
overcome before it can generate value, it is
used in capital
the capital
process to
cost of various
varies from
company towhether
on factors
a project.
operating history, profitability, credit worthiness,

Operating Cost
Expenses associated with administering a
business on a day to day basis. Operating costs
include both fixed costs and variable costs.
Fixed costs, such as overhead, remain the
same regardless of the number of products
produced; variable costs, such as materials,
vary according
have to to
of product
produced. costs and costs associated with nonoperating
operating activities, such as interest expenses
on a loan. Both costs are accounted for
differently in a company's books, allowing
analysts to see how costs are associated with
revenue-generating activities and whether or

Working Capital Cost

Working capital (abbreviated WC) is a financial
metric which represents operating liquidity available
to a business, organization or other entity, including
governmental entity. Along with fixed assets such as
plant and equipment, working capital is considered
a part of operating capital. Gross working capital
equals to current assets. Working capital is
calculated as current assets minus current
liabilities.[1] If current assets are less than current
liabilities, an entity has a working capital deficiency,
also called a working capital deficit.

Opportunity Cost
1. The cost of an alternative that must be forgone in
order to pursue a certain action. Put another way, the
benefits you could have received by taking an
alternative action.
2. The difference in return between a chosen
investment and one that is necessarily passed up. Say
you invest in a stock and it returns a paltry 2% over
the year. In placing your money in the stock, you gave
up the opportunity of another investment - say, a riskfree government bond yielding 6%. In this situation,
your opportunity costs are 4% (6% - 2%).