the ratio obtained by dividing the anticipated benefits of a project by its anticipated costs (or realized benefits by realized costs) to obtain a measure of expected (or realized) benefits per unit of cost —note 1. a benefit-cost ratio is usually based on discounted incomes and costs (or compounded incomes and costs) —note 2. a benefit-cost ratio should include all benefits and costs borne by society as well as the individual firm, but in practice this is rarely achieved, which can lead to investment and production levels that differ from true social equilibria —see cost-benefit ratio, discounted cash flow This definition last updated 10/24/2008