Cost benefit analysis is a process used primarily by businesses that weighs the sum of the benefits, such as financial gain, of an action against the negatives, or costs, of that action. An example is a benefit-cost ratio greater than 1: the closer it gets to 1, the higher the risk that even small deviations from the forecasted benefits lead to a loss-producing project. Although the cost-benefit analysis is not an original risk management technique, its results can be used to assess and consider certain risks of a project. The Process of Cost Benefit Analysis. But the concept of CBA as we know it dates to Jules Dupuit, a French engineer, who outlined the process in an article in 1848. Generally, Cost Benefit Analysis is a simple yet essential financial technique that helps investors to decide whether or not to pursue their dream project. Cost benefit analysis is generally undertaken for any kind of project involving capital expenditure, policy development, setting of standards, and use of assets. An example of Cost-Benefit Analysis includes Cost-Benefit Ratio where suppose there are two projects where project one is incurring a total cost of $8,000 and earning total benefits of $ 12,000 whereas on the other hand project two is incurring costs of Rs. Project managers use cost-benefit analysis in the project initiation phase to show the value of doing a project. Actually, CBA is systematic approach to calculating involved costs to determine project will get benefit, which may be expecting to exceed costs over the project life cycle. A cost benefit analysis is an analytical process to estimating all costs associated with project, and comparing costs to determine benefits from proposed business opportunity. According to the Economist, CBA has been around for a long time.In 1772, Benjamin Franklin wrote of its use. If the nature of the project is easy going the results will be quick, but if it is complex they may take time in evaluation. Cost-benefit analysis is a simple technique for comparing the business value a project will produce with the cost of producing it. To calculate the CBA, you only need to compare the cost and the benefits associated with the project. Examples of Cost-Benefit Analysis.

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