Cost-benefit analysis – economic tool used to aid decision-making regarding the distribution of public funds

Abstract

After 1990, the financial analysis of the phenomena that occur in firms has grown in importance. Financial analysts face new challenges as a result of Romania’s accession to the European Union. A thorough analysis of the investment decisions is required in order to access structural funds. Many projects that may be granted funds are not feasible from a financial point of view, generating economic and social implications. To demonstrate that the demanded funds are truly needed, the analyst has to identify and quantify as precisely as possible all costs and benefits generated by that specific investment, task which may be accomplished with the use of Cost-Benefit analysis. For this reason, in the following pages, we shall present the main methodological aspects of the method accompanied by an example of how it is used.