1. What is Cost Benefit Ratio?

Cost Benefit Ratio (BCR) is a financial metric used to evaluate the relationship between the benefits and costs of a project or investment. It helps determine whether the benefits outweigh the costs.

2. How Does the Calculator Work?

The calculator uses the simple Cost Benefit Ratio formula:

Where:

• \( Benefits \) — Total monetary benefits of the project ($)
• \( Costs \) — Total monetary costs of the project ($)

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

3. Importance of Cost Benefit Analysis

Details: Cost Benefit Analysis is crucial for decision-making in business, government projects, and personal finance. It helps identify the most economically viable options and allocate resources efficiently.

4. Using the Calculator

Tips: Enter the total benefits and costs in dollars. Both values must be positive numbers, with costs greater than zero.

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 get $1.50 in benefits, indicating a positive return on investment.

Q2: What is considered a good BCR?
A: Generally, a BCR greater than 1.0 is considered acceptable, while a ratio of 2.0 or higher is typically considered excellent.

Q3: Can BCR be negative?
A: No, BCR cannot be negative since both benefits and costs are positive values. However, it can be less than 1, indicating poor investment.

Q4: What are the limitations of BCR?
A: BCR doesn't account for the time value of money, risk factors, or intangible benefits that are difficult to quantify monetarily.

Q5: How is BCR different from ROI?
A: BCR compares benefits to costs as a ratio, while ROI calculates the percentage return on investment relative to the cost.