A tool used to quantify the relative value of a project or investment, dividing the total expected benefits by the total expected costs. The result yields a numerical representation indicating whether the benefits outweigh the costs. For instance, a value greater than one suggests that the anticipated gains surpass the expenditures, potentially indicating a worthwhile undertaking.
The employment of such instruments provides a structured method for evaluating proposals, facilitating informed decision-making across various sectors. Historically, these calculations have aided in prioritizing projects, allocating resources efficiently, and justifying investments to stakeholders. Their application promotes accountability and transparency in resource management, supporting long-term strategic planning.