What is the BIR formula?

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Study for the Certified Defense Financial Manager (CDFM) Exam 1. Engage with flashcards and multiple choice questions, with hints and explanations for each query. Prepare confidently for your exam!

Multiple Choice

What is the BIR formula?

Explanation:
BIR measures how much benefit you get for each unit of resources invested. The formula is Benefits divided by Investment, so it expresses Benefits per dollar of invested capital. If the result is greater than 1, the project is expected to yield more in benefits than it costs to invest, indicating potential feasibility. This differs from a benefit-to-cost ratio, which uses Costs in the denominator, and from the reciprocal or other variants that don’t reflect the realized investment outlay.

BIR measures how much benefit you get for each unit of resources invested. The formula is Benefits divided by Investment, so it expresses Benefits per dollar of invested capital. If the result is greater than 1, the project is expected to yield more in benefits than it costs to invest, indicating potential feasibility. This differs from a benefit-to-cost ratio, which uses Costs in the denominator, and from the reciprocal or other variants that don’t reflect the realized investment outlay.

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