What is the primary purpose of conducting a cost-benefit analysis?

The primary purpose of conducting a cost-benefit analysis is to decide whether to pursue a specific course of action based on its financial impact. This analysis involves comparing the costs associated with a particular decision to the anticipated benefits it will generate. By quantifying these factors, organizations can make informed decisions about whether the benefits outweigh the costs, making it a crucial tool for strategic planning and resource allocation.

This approach allows decision-makers to assess the potential return on investment (ROI) and understand the implications of their choices, ultimately guiding them toward options that align with their financial goals and organizational strategy. If the expected benefits exceed the costs, it suggests that the action is likely to be a sound investment, while a negative or uncertain outcome would indicate re-evaluation or a different direction.

The other options, while related to business analysis, do not capture the essence of what a cost-benefit analysis is designed to achieve. Evaluating past financial performance focuses more on historical data analysis than on making future decisions. Assessing market trends and consumer behavior is important for understanding the environment in which a business operates, yet it does not specifically address the financial implications of a particular choice. Analyzing employee performance and productivity is vital for internal management processes but falls outside the scope of financial decision