What is benefit-cost analysis (BCA)?
Benefit-Cost Analysis or ‘BCA’ (also known as Benefit-Cost Ratio ‘BCR’) is a simple exercise of dividing your OVERALL projected business profits by your OVERALL projects costs.
It is a ratio which tells you:
- if your project costs are covered by the income… or;
- if you will be left exposed in any way should you choose to invest…
Understanding benefit-cost analysis (BCA)
Benefit-cost ratio is a skim read hack for investors.
It tells you if your project is scheduled to make a profit after all INPUTS have been considered,
…at a glance.
Any number above 1 tells you the poultry farm proposal is scheduled to make a NET PROFIT.
Below 1, tells you the proposal is calculated to lose value.
1 exactly reads a break even.
BCA is like a green light at a junction.
It indicates to you that it’s alright to move forward,
BUT it doesn’t override the using of one’s eyes before you push the accelerator.
The usual what if’s apply: (cars ahead, pedestrians, emergency vehicles etc.)
As the old British Rail steam driver’s motto goes: