In the year 1930, a French Engineer Jules Dupuit introduced the concept of the cost benefit analysis. It became popular in the year 1950 as a simple method of measuring the project costs and the benefits for determining whether the project can have a positive impact.
As the name suggests, cost benefit analysis includes the benefits of the course of actions where the benefits can be added where the costs can be compared. The final outcome of the analysis can be shown as the payback period. It is the actual time that is used for the benefits of repaying the costs. Many individuals can use this particular analysis for less than specific period, for example; for 2 years. The technique can be used in various situations like
- When you decide to recruit new team members
- When you evaluate new or upcoming projects for changing the initiatives
- When the feasibility of the capital purchase can be determined
For quick and simple financial decisions, the cost benefit analysis can be used.