Capital Structure Question:
Explain Explicit cost and Implicit cost?
Answer:
Explicit cost is the cost which is external to the business like wage, rent and materials. It gives clear picture of the cash outflow from business which is used to decrease the end result of profitability. This directly affects the revenue of the company.
Implicit cost is the result of one person who tries to satisfy his needs in search of an activity which gives no reward to him by money or another form of payment. It includes benefits and satisfaction. For example- goodwill. It is not counted in terms of money and it is indirect intangible cost.
Implicit cost is the result of one person who tries to satisfy his needs in search of an activity which gives no reward to him by money or another form of payment. It includes benefits and satisfaction. For example- goodwill. It is not counted in terms of money and it is indirect intangible cost.
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