A student or aprofessional can never deny the impact of
cost benefit analysis ona business. Its primary purpose is to confirm a sufficient supply of money from
the appropriate source at the proper cost and in the appropriate time reaches
the company to meet its financial needs. With the advancement in business strategies
and policies, company’s economic activities have changed a lot, and over time
the cost benefit analysis has gained its importance. (
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Mentioned below arethe importances of cost benefit analysis.
- Determines business success
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Sound cost benefitanalysis marks the success, existence, and growth of a company. Cost benefit
effectively uses the man, machine, and material of the company to develop a
plan for developing, expanding, and successfully executing these resources.
Proper cost benefit analysis takes a business to heights in months and even
gets foreign direct investment or
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- The focal point of Decision making
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Cost benefit analysisis the scientific method of analysis of a company’s facts and figures. It helps
to evaluate the effectiveness of the project in any given circumstance so that
the company can take correct decisions that will help reduce the involved risks
in a project. (
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- Measurement of performance
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One can measure theperformance of a company by its financial results. Risk profitability and
brandmanagement are the few main factors determining the valuation of the organization.
Those financialdecisions and brand management decisions that increase the organization’s risk
reduce the firm’s value. In contrast, those decisions which increase the
fortune of the company increase the value of the organization.
Thus the observedessential elements of a business organization affect the earning stream or
profitability of the company or its risk depending on the cost benefit analysis
decisions or policy decisions taken.
Cost benefit plays avital role in the success of an organization. It features the facts and figures
about the financial position of the company and the functioning of its various
elements. It displays the firm’s top management results to bring changes in the
firm's principles if required and take the correct decision for the successful
venture and profit of the company.
- Optimal Utilization of Resources
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Good cost benefitemphasizes the optimal utilization of company resources. An incorrect financial
decision may not always be the reason for the failure of performance of a
business enterprise; at times, it is the direct effect of defective management
of funds. Practical cost management analysis plays a crucial role in the
optimum manipulation and use of company resources. Optimum use of financial
resources provides maximum returns of the resources by enhancing the productive
output of the capital funds.
To conclude, the abovementioned points help you understand the importance of cost benefit analysis to
the success of a business.
Source:
https://ellariasandy.medium.com/importance-of-cost-management-for-business-success-7623b7577146
