COST BENEFIT ANALYSIS

COST BENEFIT ANALYSIS
Its is the process by which business decisions are analyzed. The benefits of a given situation is studied and the cost associated with taking that action is subtracted from the total sum. Cost- benefit analysis is used for determining which alternatives is likely to provide a better return to the proposed investment. To determine how well, or how poorly, a planned action will turn out. Although a cost benefit analysis can be used for almost anything, it is most commonly used for financial questions. A cost benefit analysis finds, quantifies, and adds up all the positive factors. Then it identifies and subtracts all the negatives, the costs. Cost- benefit analysis determines whether the balance of the project is worthwhile. The equivalent money value are based upon information derived from consumer and producer market choices; i.e, the demand and supply schedules for the goods and services affected by the project. Care must be taken to properly allow for such things as inflation. In the end a worthwhile project is in which the benefits are positive.
For e.g.- Benefits and costs associated with living in a certain town. If a person has properties in various cities, the benefit of having it in bigger cities would be much higher than the benefit derived out of it being in small cities.