What is a "cost-benefit analysis"?

A cost-benefit analysis is a systematic approach used to evaluate the strengths and weaknesses of alternative decisions or options. This method quantifies the potential costs and benefits associated with each alternative, allowing decision-makers to assess which option will yield the greatest net benefit. By converting various factors into monetary values, cost-benefit analysis helps in comparing different choices in a clear and comprehensive manner.

The importance of this analysis lies in its ability to guide effective decision-making by providing a structured framework to evaluate the impact of different actions. It offers a transparent way to weigh the pros and cons, ensuring that decisions are made based on rigorous analysis rather than intuition alone. This method is widely utilized in diverse fields such as economics, project management, and public policy, as it helps identify the most efficient and effective solutions to a given problem.

In contrast, the other options describe various analytical tools or methods that do not serve the same comprehensive evaluative purpose. Market research and inventory assessment are specialized tools focusing on specific areas, while financial statement analysis pertains strictly to assessing a company's financial health. None of these options encapsulate the broad evaluative scope of cost-benefit analysis.