Cost benefit analysis is one of the major element, which plays an important role in analyzing the firm's or organization's financial status as well as financial position. In order to know that how firm or any organization is working and to analyze that whether they are working properly, cost benefit analysis is an important step, which should be taken in order to measure the financial status of any firm and to avoid any risk if there is any.
Cost benefit analysis is an important step and now a days every single firm is working in order to make it effective. With the help of cost benefit analysis, firm can easily measure that what are the profits and how much we are generating. With the help of this analysis, any firm can easily measure that what actually is the firm getting profit from their productive packages.
Apart from all the analysis, one main thing, which every company should keep in mind, is the risk, which they might face when working with other companies. Thus, all the analysis is done in this cost benefit analysis, and in the end, every firm results in a well maintained and well being firm. Cost benefit analysis is thus termed as an essential element, which should be followed by every single firm in order to generate well-oriented and authentic outcomes. If any firm does not follow this, then they might face huge loss and will suffer too. Therefore, this is termed as an important analysis, which should be done. (Layard, pg 497, 1994)
Richard Layard, (1994), Cost-benefit analysis, Cambridge University Press, page 497.