Which term refers to a model that helps assess the viability of an investment by comparing returns against its costs?

The term that best encompasses the concept of assessing the viability of an investment by comparing the returns gained against the costs incurred is "Return on Investment" (ROI). ROI is a financial metric that is used to evaluate the efficiency or profitability of an investment, making it essential in decision-making processes. By calculating ROI, investors and project managers can comprehensively determine how much profit is generated for every dollar spent, allowing them to make informed choices about where to allocate resources based on expected financial performance.

This metric is particularly valuable because it provides a clear quantitative basis for comparing different investment options or assessing the performance of projects over time. A high ROI indicates that an investment’s returns substantially outweigh its costs, thus suggesting a favorable investment decision.

Other concepts, while related, serve different or broader purposes. For example, capital budgeting is a broader process that involves evaluating various investment opportunities and deciding which projects to pursue based on long-term financial returns. Cost-benefit analysis is more about comparing the overall benefits of a decision against its total costs rather than strictly measuring return on an investment. Return on assets (ROA) assesses how efficiently a company uses its assets to generate earnings, but it does not focus solely on the comparison of investment returns to costs in the way that ROI does