M1- Performing cost-benefit analysis Flashcards
(9 cards)
What is a cost-benefit analysis?
A cost-benefit analysis is the process of comparing the expected benefits of a project to its dollar costs to determine whether it is worth pursuing.
What are the benefits of conducting a cost-benefit analysis?
- Minimizes risks and maximizes gains.
- Helps communicate clearly with stakeholders and executives.
- Keeps the project on track.
- Uses objective data to reduce biases and self-interest.
- Helps make a strong business case for profitable projects.
- Encourages responsible resource investment.
What guiding questions help determine the benefits of a project?
- What value will this project create?
- How much money could this project save our organization?
- How much revenue will it bring in from existing customers?
- How much time will it save?
- How will it improve the customer experience?
What guiding questions help determine the costs of a project?
- How much time will people spend on this project?
- What are the one-time costs?
- Are there any ongoing costs?
- What about long-term costs?
What are intangible benefits in a cost-benefit analysis?
Intangible benefits are gains that cannot be quantified in monetary terms, such as:
- Increased customer satisfaction and retention.
- Improved employee morale and lower turnover.
- Higher employee productivity and reduced overtime costs.
- Enhanced brand perception and competitive advantage.
What are intangible costs in a cost-benefit analysis?
Intangible costs are non-quantifiable losses, such as:
- Potential damage to customer retention.
- Reduced employee satisfaction or morale.
- Negative impact on brand perception.
How can you assign values to tangible and intangible costs and benefits?
By referencing similar past projects, conducting industry research, or consulting experts.
What is return on investment (ROI) in a cost-benefit analysis?
ROI measures a project’s profitability by comparing its financial gains to its costs.
What is the formula for calculating ROI?
ROI=((G-C)/C)X100
- G = Expected financial gains
- C = Upfront and ongoing costs
