Benefit Cost Ratio - BCR

AAA

DEFINITION of 'Benefit Cost Ratio - BCR'

A ratio attempting to identify the relationship between the cost and benefits of a proposed project. Benefit cost ratios are most often used in corporate finance to detail the relationship between possible benefits and costs, both quantitative and qualitative, of undertaking new projects or replacing old ones.

INVESTOPEDIA EXPLAINS 'Benefit Cost Ratio - BCR'

As mentioned, the ratio is used to measure both quantitative and qualitative factors, since sometimes benefits and costs cannot be measured exclusively in financial terms. In cases where at all possible however, qualitative factors should be translated to quantitative terms in order for the results to be easily understandable and tangible.

RELATED TERMS
  1. Profitability Index Rule

    A regulation for evaluating whether to proceed with a project ...
  2. Shadowing

    The process of creating values for variables that don't rely ...
  3. Future Value - FV

    The value of an asset or cash at a specified date in the future ...
  4. Present Value - PV

    The current worth of a future sum of money or stream of cash ...
  5. Cost Test

    A standard test applied to a process to determine if the net ...
  6. Asset Condition Assessment

    A report outlining how an organization can manage capital assets ...
RELATED FAQS
  1. What are some of the limitations and drawbacks of using a payback period for analysis?

    Limitations, or disadvantages, of using the payback period method in capital budgeting include the fact that it fails to ... Read Full Answer >>
  2. Is a company's paid in capital affected by the trading of its shares in the secondary ...

    The amount of paid-in capital a company has is not affected by the trading of its shares on the secondary market. Paid-in ... Read Full Answer >>
  3. What is the difference between capital and operating expenses?

    A capital expense is used to purchase or invest in a long-term asset, while an operating expense is any short-term expense ... Read Full Answer >>
  4. What is the benefit of the Modified Internal Rate Of Return (MIRR)?

    The modified internal rate of return (MIRR) is a financing metric used in business capital budgeting. Its primary benefit ... Read Full Answer >>
  5. When should a business avoid debt financing?

    It is easy to conceptualize when a business should avoid debt financing, such as whenever debt results in excessive future ... Read Full Answer >>
  6. Why is the Modified Internal Rate Of Return (MIRR) preferable to the regular internal ...

    Even though the internal rate of return metric is popular among business managers, it tends to overstate the profitability ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Ratio Analysis Tutorial

    If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
  2. Investing Basics

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...
  3. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  4. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  5. Fundamental Analysis

    Understanding the Capital Adequacy Ratio

    The capital adequacy ratio (CAR) is an international standard that measures a bank’s risk of insolvency from excessive losses. Currently, the minimum acceptable ratio is 8%. Maintaining an acceptable ...
  6. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...
  7. Fundamental Analysis

    Capital Budgeting

    Capital budgeting is a planning process used by companies to evaluate which large projects to invest in, and how to finance them. It is sometimes called “investment appraisal.”
  8. Investing

    Return On Capital Employed - ROCE

    Return on Capital Employed (ROCE) is a financial ratio that measures company's ability to earn a return on all of the capital it employs.
  9. Investing

    Capital Structure

    Capital structure is the combination of the debt and equity a company uses to finance its long-term operations and growth.
  10. Investing Basics

    Capitalization Rate

    Capitalization Rate is a financial term most commonly used in the real estate investment industry. It is often simply called the Cap Rate.

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!