What key element is included in a cost-benefit analysis?

A cost-benefit analysis is an essential tool in decision-making that evaluates the total expected costs against the total expected benefits of a project or investment. The key element of this analysis is the comparison of both costs and expected benefits.

This process allows analysts and decision-makers to determine whether the benefits of a project outweigh its costs, providing a basis for making informed choices. By calculating the net benefit or net present value, stakeholders can effectively assess the viability and financial justification of a project.

In contrast, focusing solely on financial investment, employee morale, or risks does not capture the comprehensive nature of cost-benefit analysis. While these factors can be relevant to decision-making, they do not encapsulate the core purpose of directly comparing costs and benefits to discern the overall value of an initiative.