The forgone amount for holding the balances of cash at the time they are received is classified as ____________?
Correct answer: C. opportunity cost
- A. forgone cost
- B. debt cost
- C. opportunity cost
- D. balances cost
Explanation
The benefit forgone when cash is held instead of invested or used elsewhere is its opportunity cost. It is not a debt cost, because no borrowing is involved.
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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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