Cost-benefit analysis is a systematic approach to estimating the strengths and weaknesses of alternatives to determine the best option. It measures all positive and negative consequences of a decision, project, or policy in monetary terms. The main applications of CBA are to determine if an investment's benefits outweigh its costs, and to compare total expected costs and benefits of different options. The ultimate goal of CBA is to adopt financial operations that produce more benefits than costs for an organization to survive and prosper.

1. Cost
Costis defined as the cash amount (or the cash
equivalent) given up for an asset.
Costdenotes the amount of moneythat a
company spends on the creation or production of
goods or services.
This is the amount that the seller charges for a
product, and it includes both the
productioncostand the mark-up, which is added
by the seller in order to make a profit.

2. Cont…
Any negative effect on an organization resulting
from the implementation of the project.
Example
1.Maintenance costs
2.Environment
3.Research anddevelopment
4.Labourcosts, etc.

3. Benefit
Something that produces good or helpful results
or effects or that promotes well-being
A benefit is any positiveeffect on the organization
resulting from the implementation of theproject.

4. Cont…
Example
1. Increase inproductivity
2. Reduction incosts
3. Savingtime, Etc.

6. Definition
Cost–benefit analysis(CBA), sometimes also
calledbenefit–cost analysis, is a systematic approach
to estimating the strengths and weaknesses of
alternatives used to determine options which provide
the best approach to achieving benefits while
preserving savings (for example, in transactions,
activities, and functional business requirements).
 CBA may be used to compare completed or potential
courses of actions, or to estimate (or evaluate) the
value against thecostof a decision, project, or policy.

7. Cont…
An approach to make economic decisions of any
kind.
Economic evaluation technique that measures all
the positive (benefits) and negative (cost)
consequences of an intervention or programme in
monetaryterms.
Or
It is a process for evaluating the merits of a
particular project in a systematic way in terms of
cost & benefits of theproject.

8. Applications of CBA
CBA has two main applications:
To determine if an investment (or decision) is sound,
ascertaining if –and by how much –its benefits
outweigh its costs.
To provide a basis for comparing investments (or decisions),
comparing the total expected cost of each
option with its total expected benefits.

9. Concept
Cost benefit is a tool which modern financial
analysts adopt before undertaking any financial
operation or commercial activity.
The ultimate aim of a business organization is to
make profits.
Therefore,any system in the organization must
produce more benefits as compared to its costs for
the organization to survive &prosper.

10. Cont…
A cost benefit analysis is done to determine how
well, or how poorly, aplanned action will turnout.
The analysis relies on the addition of positive
factors and the subtraction of negative ones to
determine a netresult.
CBA has been established primarily as a tool for use
by governments in making their social and
economicdecisions.