Implicit Cost

If a company’s accounting profit is the difference between total revenues less explicit costs (wages, building expenses, overheads etc), its economic profit also includes its implicit or implied costs. Implicit costs are the opportunity costs of using what a company owns, or assets that are being sub-optimally utilised for generating revenue. Companies might bear implicit costs as a cost of doing business. Implicit costs can be hard to quantify but are important to include when making business decisions.

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