Cost-benefit analysis
Cost-benefit analysis
Cost-benefit analysis (pronunciation: /kɒst ˈbɛnɪfɪt əˈnælɪsɪs/) is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings.
Etymology
The term "cost-benefit analysis" is derived from the English words "cost" and "benefit" combined with "analysis". "Cost" originates from the Latin costa meaning "rib" or "side", metaphorically referring to the price one has to pay for something. "Benefit" comes from the Latin bene factum meaning "good deed". "Analysis" is derived from the Greek ἀνάλυσις (analusis) meaning "a breaking up, a loosening, releasing".
Definition
A Cost-benefit analysis is a process used by organizations to analyze decisions. The business or analyst sums the benefits of a situation or action and then subtracts the costs associated with taking that action.
Related Terms
- Cost-effectiveness analysis: A form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action.
- Cost-utility analysis: A form of financial analysis used to guide procurement decisions.
- Opportunity cost: The loss of potential gain from other alternatives when one alternative is chosen.
- Net present value: The difference between the present value of cash inflows and the present value of cash outflows over a period of time.
See Also
External links
- Medical encyclopedia article on Cost-benefit analysis
- Wikipedia's article - Cost-benefit analysis
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