Explicit Cost

AAA

DEFINITION of 'Explicit Cost'

A business expense that is easily identified and accounted for. Explicit costs represent clear, obvious cash outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value.

BREAKING DOWN 'Explicit Cost'

Good examples of explicit costs would be items such as wage expense, rent or lease costs, and the cost of materials that go into the production of goods. With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attributed.

RELATED TERMS
  1. Step Costs

    Business expenses that are constant for a given level of activity, ...
  2. Absorbed Cost

    The indirect costs that are associated with manufacturing. Absorbed ...
  3. Implicit Cost

    A cost that is represented by lost opportunity in the use of ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the ...
  5. Variable Cost

    A corporate expense that varies with production output. Variable ...
  6. Opportunity Cost

    1. The cost of an alternative that must be forgone in order to ...
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  3. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  4. Investing Basics

    3 Companies That Hate Debt Financing

    Learn how companies such as Chipotle, Bed Bath & Beyond, and Paychex are able to maintain impressive levels of growth without debt financing.
  5. Fundamental Analysis

    The Economics of FanDuel

    Part of fantasy sports’ success lies in one-day and week-long contests serving as an alternative to season-long games. FanDuel, a leader in this space, has recently surpassed a $1 billion valuation.
  6. Personal Finance

    Invest in Costco? First Understand Its Balance Sheet

    A strong balance sheet sets a company apart and boosts investor confidence. How healthy is Costco based on an analysis of its balance sheets from the last two years?
  7. Active Trading Fundamentals

    Oil Exploration Companies Pose High Risk for Investors

    Learn why oil exploration companies pose high risks for investors. Oil exploration stocks are highly leveraged to the price of crude oil.
  8. Stock Analysis

    3 High-Yield Investment Grade Stocks You Should Consider

    Discover three high-yield investment-grade stocks for income and appreciation. Interest rate risk is the largest source of risk for investors.
  9. Term

    What is Incremental Cost?

    Incremental cost is the added cost of manufacturing one more unit.
  10. Term

    What is Horizontal Analysis?

    Horizontal analysis compares a company’s balance sheet or income statement over two or more accounting periods.
RELATED FAQS
  1. Which is more important to economists, the marginal propensity to consume or the ...

    Economic profit is a measure of a company's performance found by calculating the amount it generates in revenues. Use Microsoft ... Read Full Answer >>
  2. What's the difference between economic value added (EVA) and accounting profit?

    Economic value added (EVA) is a measure of a company's economic profit, which is the profit earned by a company minus the ... Read Full Answer >>
  3. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  4. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!