Opportunity Cost in Financial Modeling and Analysis
Published in
7 min readMar 23, 2020
Opportunity cost represents the benefits the business misses out on when picking between alternatives. When we have two desirable options, the benefit from the one not chosen is our opportunity cost.
These costs are usually the result of bottlenecks in business processes. Therefore, finance professionals use Opportunity Cost analysis to improve the decision-making process and make informed choices.
As an example, we can look at salary. If we take unpaid leave to go on vacation, our remuneration will be our…
