Opportunity Cost
The return given up by choosing one use of money over the next best.
What is Opportunity Cost?
Every choice forgoes an alternative. The risk-free rate is the baseline opportunity cost of any investment: if T-bills pay 4%, cash earning 0% costs 4% a year.
Opportunity Cost: a worked example
Keeping $50,000 in checking while T-bills yield 4% costs roughly $2,000 a year.
More terms in Economics & Financial Reporting
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.