What does cost-benefit analysis help evaluate?

Cost-benefit analysis is a systematic approach used to evaluate the economic merits of a project or decision by comparing the total expected costs against the total expected benefits. This analysis helps stakeholders assess whether a project is financially viable and justifiable, providing a clearer picture of the potential financial implications involved.

By quantifying both the costs—such as initial investments, ongoing operational expenses, and potential risks—and the benefits, which may include revenue generation, cost savings, and qualitative advantages, cost-benefit analysis assists in making informed decisions about resource allocation and project prioritization.

While aspects like project timelines, employee satisfaction, and vendor selection may play important roles in the overall project management process, they do not focus specifically on the financial evaluation that cost-benefit analysis aims to achieve. Hence, the primary role of cost-benefit analysis is to illuminate the financial implications of a project, guiding decisions that align with organizational financial goals.