2 min read
Definition
Opportunity cost is the value of the best thing you forgo by choosing one use of money over another. When you spend cash reserves on an asset, the opportunity cost is what that cash could otherwise have done — funded stock, seized a deal, or simply protected the business against a shock. It is invisible on any invoice but entirely real.
Opportunity cost is why draining reserves to avoid interest can cost more than borrowing: the interest is visible, the forgone buffer is not. See using cash vs borrowing and loan vs savings.
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