What Is an Outlay Cost?

By Catherine Brock – Updated Dec 18, 2024 at 10:42 AM

Key Points

Outlay costs are direct cash expenses tied to specific business initiatives, like new projects.
Opportunity costs represent potential profits lost by choosing one investment over another.
Outlay costs can be capitalized or expensed on financial statements, impacting balance sheets.

An outlay cost is cash spent on a defined project or activity. However, you probably won't see this line item on a financial statement. You're more likely to hear the term in leadership presentations and prepared remarks. Read on to learn about outlay costs and how they relate to ongoing business expenses and capital expenditures.

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Since these costs will be paid at different times throughout the 14-month project, they'll flow through to the financial statements across multiple periods. Some will be expensed on the income statement, and others will be capitalized on the balance sheet.

Also, the project's total cost could be much higher than the $10 million outlay. Say the business has the $10 million sitting in the bank, earning 2% interest. By withdrawing that cash and funneling it into the new facility, the company will relinquish up to $16,500 in monthly interest income. The forgone income is the opportunity cost.

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About the Author

Catherine grew up in Southern California wearing a lot of black and trying to perfect the art of sarcasm. Prior to joining The Fool as a contract writer, Catherine was climbing the corporate ladder in marketing roles and dabbling in too many side hustles. When she's not writing, she can be found riding a horse in the country or shopping online for clothes.

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