What are costs that require a direct outlay of money by a firm called?

The term that describes costs requiring a direct outlay of money by a firm is explicit costs. These costs are tangible and involve direct payment for resources or services, such as salaries, rent, and materials. Explicit costs are crucial in financial accounting as they are easily identifiable and measurable, reflecting the actual cash transactions occurring within a business.

Contrasting this with implicit costs, which represent the opportunity cost of utilizing resources owned by the firm without a direct cash payment, explicit costs provide a straightforward understanding of the monetary expenses a firm incurs. Fixed costs are those that do not change in the short term regardless of the level of production, while opportunity costs refer to the benefits foregone from not choosing the next best alternative. Understanding explicit costs is essential for organizations to effectively manage their finances and analyze profitability.