Definition
A method of comparing the costs and benefits of a decision to see if it’s worth it. It helps in making smart financial choices.
What to consider
- Understand the direct costs associated with producing goods.
- Use COGS to set appropriate pricing and assess profitability.
- Monitor changes in these costs to adjust your business strategy.
Real world scenarios
- Before renovating her kitchen, Lydia compares project expenses to the potential increase in home value. Her cost-benefit analysis helps her decide which upgrades make sense.
- A startup founder evaluates hiring extra staff versus potential revenue gains. The analysis clarifies whether the new hires can justify their salaries.
- Steven debates between a personal car purchase or continued ridesharing. His cost-benefit breakdown accounts for insurance, maintenance, and convenience factors.
Related terms
Related Playbooks
Get instant access to all our expert playbooks and 1-1 financial coaching when you join the Bolder Money community. Learn more here.
Investments & Retirement
Investment Strategy Guide
Investments & Retirement
The Ultimate Guide to Finding Lost Retirement Accounts: Recover Your Missing Money
Investments & Retirement
Retirement Planning Guide
