Benefit Cost Ratio

Overview of Benefit Cost Ratio
The benefit cost ratio is a type of capital budgeting method. It acts as an indicator. The benefit cost ratio is used extensively in cost-benefit analysis. It tries to provide a complete monetary value of any business plan or undertaking.

Description of Benefit Cost Ratio
The benefit cost ratio could be described as the ratio of advantages that would be provided by a particular business project to the cost of project. The benefit cost ratio is normally conveyed in terms of money. The benefit cost ratio is related to the expenses that may be incurred in a particular business project.

The advantages and the expenses incurred in a project are supposed to be conveyed in present values and these present values are supposed to be expressed in a reduced form.

Application of Benefit Cost Ratio
As far as application is concerned benefit cost ratio is the ratio of net present value of a project to the various costs that may be incurred while completing it.
The benefit-cost ratios are used most often in the measurement of the cost-benefit ratio of projects that are related to transportation.

The benefit-cost ratio could be used to measure the qualitative aspects that are involved in any project. That means the factors, which cannot be assessed normally, are measured by the benefit-cost ratio.

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Last Updated on : 27th June 2013

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