Definition
Cost-benefit analysis compares the expected costs of an undertaking with its anticipated economic, operational, social or strategic benefits.
Human Explanation
It helps answer the question: do the expected benefits justify the costs?
Why it Matters
A financially profitable investment is not always strategically beneficial, just as a strategic investment does not always provide a rapid financial return.
Conceptual Boundary
Cost-benefit analysis is not limited to monetary values. Depending on its purpose, it may also consider qualitative, social, environmental or organisational effects.
Practical Perspective
The analysis should include direct and indirect costs, risk, delivery time and the project’s effect on the organisation’s long-term objectives.