What is a primary objective of cost-benefit analysis?

The primary objective of cost-benefit analysis is to compare the costs and expected benefits of a project. This analytical tool is designed to help decision-makers evaluate the financial implications of various projects or initiatives by quantifying and comparing the negative and positive aspects. By assessing both the costs involved — including expenses, resources, and potential risks — against the anticipated benefits, such as increased revenue, improved efficiency, or enhanced satisfaction, stakeholders can make informed decisions regarding whether to proceed, revise, or abandon a project.

This structured approach is particularly useful because it helps prioritize projects based on their expected return on investment, enabling organizations to allocate resources effectively and maximize their overall benefits. The focus on a direct comparison of costs and benefits is what distinguishes cost-benefit analysis from other types of assessments, making it an essential tool in project management and strategic planning.