Opportunity Cost in Finance and Accounting

Opportunity Cost in Finance and Accounting

Opportunity Cost in Finance and Accounting

Opportunity Cost in Finance and Accounting

Synopsis

This volume examines the classical economic theory of opportunity cost, and its practical application in decision making, managing, and business problem solving in the fields of finance and accounting. The authors provide numerous examples to demonstrate each specific issue, and have structured their work in a way that even people with a minimum background in economics can understand. The book offers simple illustrations to introduce the framework and basic concepts, reviews applications in economic theory, and clarifies the many issues related to multidimensional and interdependent problem statements in practical situations.

Excerpt

This book is about decision making, and business problem solving, emphasizing the concept of opportunity cost. While this subject is deeply rooted in economic theory, scientific methodology, philosophical beliefs, and generally accepted accounting principles (GAAP), this book attempts to present the material in an interesting and relevant manner.

At the outset, it should be recognized that the idea of opportunity cost is more than 200 years old. Defined as an integral part of classical economic theory that addresses problems resulting from scarcity, opportunity costs exist whenever the acceptance of one alternative precludes other alternatives. Thus, the concept of opportunity cost and its measurement are closely associated with the theory of choice, the concept of value, and the framework of rational decision making.

The main thrust of this book addresses the question of why a concept over 200 years old is not yet fully understood and why the opportunity cost concept is particularly relevant today. One of the reasons pertains to the development of increasingly sophisticated and affordable computer systems and their use in . . .

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