What is a cost-benefit analysis?

A cost-benefit analysis is a systematic approach to evaluating the potential advantages and disadvantages associated with a particular decision or project. It involves quantifying and comparing the costs incurred against the benefits expected to be gained. This method helps decision-makers assess whether the benefits of a project justify the costs and enables them to make informed choices based on the potential return on investment.

In the context of decision-making, this analysis is critical as it provides a clear framework for weighing options and prioritizing initiatives based on their expected outcomes relative to their costs. By focusing on the relationship between costs and benefits, it empowers stakeholders to determine the feasibility and desirability of different courses of action, ensuring that resources are allocated efficiently.

The other options do not align with the fundamental purpose of a cost-benefit analysis. While determining project timelines and calculating profit margins are important aspects of management, they do not involve a direct comparison of costs and benefits in the same way. Similarly, gauging employee performance is focused on individual contributions and effectiveness rather than a financial evaluation of a project or decision-making process. Hence, the correct answer captures the essence of what a cost-benefit analysis truly entails.