Opportunity costs
This query is : Resolved
17 January 2014
When do opportunity costs affect short run decisions? What accounting problems do opportunity costs involve?
18 January 2014
Dear Apurva,
Opportunity cost can affect any decision including the shortest possible horizons.
For eg: even a 1 month FD v/s investment in 30 days debt MF needs a opportunity cost analysis.
With regards to accounting, opportunity cost involves no problem as it is not accounted for in the accounting records.
Continuing with the earlier example: let say FD has 4% interest and Debt MF yield is 4.1%. Now the opportunity cost for investing in Debt MF is 4%. But in the books no such entry is passed.
Opportunity cost can affect any decision including the shortest possible horizons.
For eg: even a 1 month FD v/s investment in 30 days debt MF needs a opportunity cost analysis.
With regards to accounting, opportunity cost involves no problem as it is not accounted for in the accounting records.
Continuing with the earlier example: let say FD has 4% interest and Debt MF yield is 4.1%. Now the opportunity cost for investing in Debt MF is 4%. But in the books no such entry is passed.
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