Transaction Cost Definition

A transaction cost is a cost incurred during a business transaction. Transaction costs can include fees paid for goods and services, as well as costs related to the transport, storage, and processing of these items. In some cases, transaction costs may also include taxes or other charges imposed by governments.

Transaction costs are often hidden or difficult to quantify, making them easy to overlook. However, they can have a significant impact on the bottom line of a business. For example, if a company ships products internationally, it will incur transaction costs such as customs duties and shipping fees. These costs can add up quickly, eating into profits.

Understanding transaction costs is essential for businesses of all sizes. By carefully tracking and managing these costs, companies can improve their bottom line and better compete in today’s global marketplace.