1. What is Cost-Benefit Ratio?

The Cost-Benefit Ratio (BCR) is a financial metric used to evaluate the relationship between the costs and benefits of a project or investment. It provides a quantitative measure of the efficiency and viability of a proposed endeavor.

2. How Does the Calculator Work?

The calculator uses the Cost-Benefit Ratio formula:

Where:

• \( \text{Total Benefits} \) — Sum of all monetary benefits ($)
• \( \text{Total Costs} \) — Sum of all associated costs ($)

Interpretation: A BCR greater than 1 indicates that benefits outweigh costs, while a ratio less than 1 suggests costs exceed benefits.

3. Importance of Cost-Benefit Analysis

Details: Cost-benefit analysis is crucial for decision-making in business, government, and personal finance. It helps determine whether a project is financially viable and provides a basis for comparing different investment options.

4. Using the Calculator

Tips: Enter total benefits and total costs in dollars. Both values must be positive numbers, with costs greater than zero. The calculator will compute the ratio of benefits to costs.

5. Frequently Asked Questions (FAQ)

Q1: What does a BCR of 1.5 mean?
A: A BCR of 1.5 means that for every dollar spent, you receive $1.50 in benefits, indicating a positive return on investment.

Q2: What are some limitations of cost-benefit analysis?
A: It may not capture intangible benefits/costs, future uncertainties, or distributional effects across different stakeholders.

Q3: How should I quantify intangible benefits?
A: Intangible benefits can be estimated through market research, surveys, or by comparing with similar projects that have measurable outcomes.

Q4: Is a higher BCR always better?
A: Generally yes, but other factors like risk, timeframe, and strategic alignment should also be considered in decision-making.

Q5: Can BCR be used for personal financial decisions?
A: Yes, BCR can help evaluate personal investments, major purchases, or career decisions by comparing expected benefits to costs.