What is the project analysis technique that compares the cost of a project against its expected financial benefits?

The project analysis technique that compares the cost of a project against its expected financial benefits is cost-benefit analysis. This technique is essential for evaluating a project's viability by assessing whether the anticipated economic gains justify the investment involved. It provides a structured way to quantify and compare the potential benefits and costs associated with a project, enabling stakeholders to make informed decisions on whether to proceed, modify, or abandon the project.

Cost-benefit analysis involves identifying all relevant costs (both direct and indirect) and all potential benefits (such as revenue generation, cost savings, or improved efficiency). By calculating the net benefits, or the difference between total benefits and total costs, project managers can evaluate the project's return on investment (ROI) and overall financial sense.

While physical capacity refers to the ability of resources to accommodate project demands, and financial capacity deals with how well an organization can finance a project, these concepts do not directly involve the comparative analysis of costs and benefits. Competitive analysis focuses on assessing market position and competitor performance, which is separate from evaluating a project's own costs versus projected financial benefits. Therefore, cost-benefit analysis emerges as the most relevant and effective technique for this purpose.