Certified Forester Practice Exam

What does a Benefit/Cost ratio (B/C) greater than 1 imply?

1. The investment is not acceptable

2. The investment is generally considered acceptable

3. The project will incur losses

4. The costs outweigh any potential benefits

The correct answer is: The investment is generally considered acceptable

A Benefit/Cost ratio (B/C) greater than 1 implies that the benefits derived from the investment exceed the costs incurred in making that investment. This indicates that for every unit of currency spent, there are more than one unit of currency in benefits generated. Thus, it suggests that the project will create a net positive return, making the investment generally considered acceptable. This measure is commonly used in economic and financial analyses to assess the viability of projects and investments, helping decision-makers determine if the potential benefits justify the costs involved. Hence, the higher the B/C ratio, the more favorable the investment appears, which aligns with the understanding that a ratio above 1 signifies a worthwhile investment.