Which analysis helps identify business value and ROI?

• A. Cost-benefit analysis.
• B. Wishful thinking analysis.
• C. Random guessing.
• D. Ignoring metrics.

Answer: (A)

Cost-benefit analysis is the tool that helps identify business value and ROI. It works by listing all the costs of a potential action and all the benefits it would bring, then putting a monetary value on each item. By subtracting total costs from total benefits, you get the net value, and comparing that net value to the investment gives you ROI. This approach provides a clear, quantitative basis for deciding whether a project is worth pursuing and how it stacks up against other options.

In practice, you’d estimate both tangible benefits (like increased revenue or reduced labor hours) and, where possible, intangible benefits (such as better customer satisfaction) and weigh them against the costs (initial investment, ongoing expenses, and potential risks). If the net benefit is positive and the ROI is compelling, the project is worth considering.

Other approaches lack this quantitative, evidence-based focus. Wishful thinking relies on desire rather than data, random guessing ignores evidence altogether, and ignoring metrics means you’re making decisions without measurable outcomes to guide them.