Opportunity cost refers to the loss of potential benefits when a resource is used for one purpose but not for other purposes. The opportunity cost of holding cash in hand is the interest income you lost because you didn't deposit it in the bank.

The more cash you hold, the greater the opportunity cost, which means the more interest income you lose.

Cash turnover period = inventory turnover period+accounts receivable turnover period-accounts payable turnover period =90+60-60=90 (days), cash turnover times =360/90=4 (times), and optimal cash holdings =2000/4=500 (ten thousand yuan).

Extended data:

Opportunity cost refers to the maximum value of giving up something else in order to get something; It can also be understood that when faced with multi-option decision-making, the highest value of abandoned options is the opportunity cost of this decision.

The cost of holding cash is the reward given up by holding cash and the opportunity cost of holding cash. This cost is usually calculated by the interest rate of securities, which varies in direct proportion to the cash balance.

When the cash holdings are greater than the optimal cash holdings, the cash holdings decrease and the total cost decreases; When the cash holdings are less than the optimal cash holdings, the cash holdings decrease and the total cost increases.

References:

Best cash holdings of Baidu Encyclopedia

Baidu Encyclopedia Opportunity Cost