Formula:
The Cost Benefit Ratio (CBR) is a financial metric used to compare the total benefits of a project or investment with its total costs. It helps in evaluating the overall financial viability and attractiveness of a proposal.
Formula:
CBR = Total Benefits / Total Costs
- Total Benefits: Represents the sum of all monetary and non-monetary gains, revenue, or positive outcomes expected from the project or investment. This could include increased revenue, cost savings, improved efficiency, or enhanced brand reputation.
- Total Costs: Represents the sum of all expenditures, investments, and potential negative outcomes associated with the project or investment. This includes initial outlay, operational costs, maintenance, and any quantifiable risks.
A CBR greater than 1 indicates that the benefits outweigh the costs, suggesting a favorable project. A ratio less than 1 suggests costs exceed benefits, while a ratio of 1 means benefits equal costs (break-even).