Cash flows that could be generated from an owned asset by company but not use in project are classified as_________________?
Correct answer: C. Opportunity costs
- A. Occurred cost
- B. Mean cost
- C. Opportunity costs
- D. Weighted cost
Explanation
The benefit sacrificed by using an owned asset in a project instead of its next-best alternative use is an opportunity cost. Although no cash purchase occurs, the forgone benefit is relevant to the decision.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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