What does cost-benefit analysis evaluate?

Cost-benefit analysis is a systematic approach used to evaluate the financial implications of project decisions by comparing the costs of a project to the expected benefits. The primary objective is to determine whether the benefits outweigh the costs, enabling project managers to make informed decisions about whether to proceed with a project or initiative.

This analysis typically involves identifying all potential costs associated with the project, including direct and indirect expenses, and quantifying the expected benefits in monetary terms. By presenting the costs and benefits side-by-side, stakeholders can assess the economic viability of the proposed project, making this evaluation a crucial part of project management.

In contrast to the focus of the other choices, which address aspects such as team performance, technical feasibility, or stakeholder impact, cost-benefit analysis specifically emphasizes the financial metrics necessary for prudent decision-making in project management. Understanding the financial implications allows leaders to allocate resources effectively and prioritize projects based on their potential return on investment.