Cost-benefit analysis
Cost-benefit analysis (CBA) is an economic analysis that converts all of the costs and benefits of a program to dollars, then weighs the costs against the benefits. CBAs typically produce a benefit-cost ratio (BCR) that describes the cost effectiveness of the program.
A benefit-cost ratio above 1.0 means the program is expected to deliver benefits overall. For example, a program with a BCR of 2.5 means every $1 spent on the program is expected to produce $2.50 of benefits. This is probably a good investment, then!
If a benefit-cost ratio is below 1.0, the program’s costs outweigh the benefits. For example, a program with a BCR of 0.75 means every $1 spent on the program is expected to produce only $0.75 of benefits. This program is not a good investment compared to the program with a BCR of 2.5.
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See also: cost effectiveness analysis