What is the primary objective of cost-benefit analysis?

The primary objective of cost-benefit analysis is to estimate the strengths and weaknesses of alternatives in order to make informed decisions. This analytical method involves comparing the total expected costs of a project or decision against its total expected benefits. By identifying and quantifying these costs and benefits, business leaders and policymakers can evaluate different options, weigh their potential impacts, and determine which choice offers the best return on investment or value.

Conducting a cost-benefit analysis allows organizations to consider both tangible and intangible factors when making decisions, fostering a structured approach that supports rational planning and resource allocation. This analytical process is vital for prioritizing projects, justifying expenditures, and ensuring that the chosen alternatives align with the strategic goals of the organization. Therefore, the role of cost-benefit analysis centers around its ability to provide a clear framework for assessing various options, facilitating better-informed decision-making.