Cost benefit analysis converted

details description of the cost benefit analysis

1. COST BENEFIT ANALYSIS
Ms. SAHELI C
LECTURER
IACN

3. CONCEPTS OF CBA
•Costbenefitanalysisisatoolwhichadoptbymodern
financialanalysts;beforeundertakinganyfinancial
operationorcommercialactivity.
•Theultimateaimofabusinessorganizationistomake
profits.
•Thereforeanysystemintheorganizationmustproduce
morebenefitsascomparedtoitscostsfortheorganization
tosurviveandprosper.
BENEFITS>COSTS

4. DEFINITION :
COST
Any negative effect on an
organization resulting
from the implementation
of the project.
•Examples:
1.Maintenance of cost
2.Environment.
3.Research and
development.
4.Labour costs.
BENEFIT
A benefit is any positive
effect on the organization
resulting from the
implementation of the
project.
•Examples:
1.Increase in productivity.
2.Reduction in costs.
3.Saving time.

6. DEFINITION:
➢Acostbenefitanalysisisaneconomicevaluation
techniquethatmeasuresallthepositive(beneficial)and
negative(costly)consequencesofaninterventionor
programmeinmonetaryterms.
➢Itisoneofthetechniquesofbudgetarycontrolinorderto
increaseoutputandminimizeinputs.
➢Costbenefitofhealthservicesisadvantageousforhealth
protection,healthpromotion,economicandsocial
development.

7. PRINCIPLES OF CBA
➢There must be a common unit of measurement.
➢CBA valuation should represent producers or
consumers.
➢Benefits are usually measured by market choices.
➢The analysis of the project involves with versus; there is
no comparison.
➢CBA involves a particular study area.
➢Double counting of benefits or cost must be avoided.

10. ADVANTAGES OF CBA
➢Canbeusedforboththenewaswellasoldprojects.
➢Itisbasedonacceptedsocialprinciplethatison
individualpreference.
➢Thismethodencouragesdevelopmentfornew
techniquesfortheevaluationofsocialbenefits.
➢Allowsforefficientallocationofresources.
➢Decreasesnegativeexternalities.

11. DISADVANTAGES OF CBA
➢Can be hard to put values to social costs and benefits
➢Can be difficult to include all externalities.
➢Costs and benefits can be different for different
groups.