What is involved in a cost-benefit analysis?

A cost-benefit analysis is fundamentally about evaluating the financial implications of a decision by comparing the expected costs against the benefits that decision is projected to yield. This approach quantifies the advantages and disadvantages associated with a project or decision, allowing stakeholders to determine whether the benefits outweigh the costs and to what extent.

This method involves identifying all relevant costs (such as resources, time, and expenses) and benefits (like revenue, savings, and improvements in efficiency) associated with the initiative. By laying out these factors side by side, organizations can make informed decisions on whether to proceed with the proposed course of action based on the overall value it provides.

In contrast, simply having a list of stakeholders does not provide an analysis of costs or benefits; it merely identifies the people involved or impacted. A detailed project timeline outlines the scheduling aspects of a project without directly assessing the financial trade-offs. Similarly, a market segmentation strategy focuses on identifying distinct groups within a target market rather than analyzing the costs and benefits of a specific decision. Thus, these alternatives do not encompass the essence of what a cost-benefit analysis entails.