capital cost in extension of credit.



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we incur collection costs, delinquency costs, default costs in extension of credit but how we incur capital costs in the credit extension?

2 Answer(s)


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When you extend credit to a company, there is the opportunity cost of the amount. Potentially you could have extended the same amount to some other company to get a better interest rate. This opportunity cost is referred to as the capital cost.

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Thankyou Sir.