What is a Cost-Benefit Analysis?

The ability to measure the costs associated with a specific program, project, or benefit. The cost is then compared to the total benefit or value derived.

A cost-benefit analysis can also include intangible benefits and costs or outcomes from a decision. For example, employee morale or customer satisfaction.

Often, the cost-benefit analysis will factor for the opportunity cost in the decision-making process. These are alternative benefits that should also be factored for when working out the results of a program. Incorporating an appreciation for the opportunity cost enables managers to compare the benefits of alternate approaches against the current path chosen for the approach in the cost-benefit analysis.