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PRESENTATION ON

COST BENEFIT ANALYSIS ITS IMPORTANCE

By Stinu kj

msw

COST BENEFIT ANALYSIS

DEFINITIONAccording to the business directory “cost benefit analysis is a

process of quantifying costs and benefits of a decision, programme, or project (over a period), and those over it alternatives, In order to have a single scale of comparison for unbiased evaluation.

It can be explained as a procedure for estimating all costs involved and possible profits to be derived from a business opportunity or proposal.

FOUNDER :FRENCH ECONOMIST JULES DUPUIT

COST AND BENEFITCOSTAny negative effective on an organisation resulting from the implementation of the project.EXMPLES1. Maintaining cost2. Environment3. Research and development4. Labour costs

BENEFITA benefit is any positive effect on the organization resulting from the implementation of the project.EXMPLES1. Increase productivity2. Reduction in costs3. Saving time

COST BENEFIT ANALYSISCBA is a quantitative analytical tool to aid decision-makers in the efficient allocation of resources. it identifies and attempts to quantify the costs and benefits of a programme or activity and converts available data into manageable information.

COST-BENEFI T ANALYSIS (CBA) is a tool used to determine the worth of a project, programme or policy. it is used to assist in making judgments and appraising available options.

The strength of the method is that it provides a framework for analysing data in a logical and consistent way

ADVANTAGES OF CBA

Makes explicit the economic assumptions that might otherwise

remain implicit or overlooked at the

design stage.

Useful for convincing policy makers and funders that the

benefits justify the activity.

Good quality approach for estimating the

efficiency of programme and

projects.

AS A BUSINESS ORGANISATION

CBA HELPS TO AUTHORITY TO ANSWER QUESTIONS SUCH AS:

1. Does the proposal provide a net benefit to the community as a whole?

2. Should the proposed project, programme or policy be undertaken?

3. Should the project or programme be continued?4. Which of various alternative projects or programmes

should be undertaken

WHY UNDERTAKE A COST-BENEFIT ANALYSIS?

The main reason for undertaking a CBA is to determine whether a project, programme or policy will make the wider community better or worse off. In other words, whether the net impact of the project is positive or negative

IMPORTANCE OF CBA ANALYSISCBA FACILITATES MEANINGFUL COMPARISONS

CBA IS CONDUCIVE TO GOOD PROGRAMME MANAGEMENT

CBA AND DISTRIBUTIONAL IMPACT

CBA AS INTEGRAL TO AN EVALUATION STRATEGY

CBA CAN HELP TO MEET LEGISLATIVE REQUIREMENTS

WHEN IS A COST-BENEFIT ANALYSIS USED?

Analysing capital

expenditure

Analysing a policy option

Using or disposing of an existing asset

Post evaluation of a project or

programme

Quantification issues

Thank you