details description of the cost benefit analysis

1. COST BENEFIT ANALYSIS
Ms. SAHELI C
LECTURER
IACN

3. CONCEPTS OF CBA
• Cost benefit analysis is a tool which adopt by modern
financial analysts; 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 and prosper.
BENEFITS > COSTS

4. DEFINITION :
COST
Any negative effect on an
organization resulting
from the implementation
of the project.
• Examples:
1. Maintenance of cost
2. Environment.
3. Research and
development.
4. Labour costs.
BENEFIT
A benefit is any positive
effect on the organization
resulting from the
implementation of the
project.
• Examples:
1. Increase in productivity.
2. Reduction in costs.
3. Saving time.

6. DEFINITION:
➢ A cost benefit analysis is an economic evaluation
technique that measures all the positive (beneficial) and
negative (costly) consequences of an intervention or
programme in monetary terms.
➢ It is one of the techniques of budgetary control in order to
increase output and minimize inputs.
➢ Cost benefit of health services is advantageous for health
protection, health promotion, economic and social
development.

7. PRINCIPLES OF CBA
➢ There must be a common unit of measurement.
➢ CBA valuation should represent producers or
consumers.
➢ Benefits are usually measured by market choices.
➢ The analysis of the project involves with versus; there is
no comparison.
➢ CBA involves a particular study area.
➢ Double counting of benefits or cost must be avoided.

10. ADVANTAGES OF CBA
➢ Can be used for both the new as well as old projects.
➢ It is based on accepted social principle that is on
individual preference.
➢ This method encourages development for new
techniques for the evaluation of social benefits.
➢ Allows for efficient allocation of resources.
➢ Decreases negative externalities.

11. DISADVANTAGES OF CBA
➢ Can be hard to put values to social costs and benefits
➢ Can be difficult to include all externalities.
➢ Costs and benefits can be different for different
groups.