Which term describes the process of evaluating the worth of investments against potential earnings?

The term that best describes the process of evaluating the worth of investments against potential earnings is cost-benefit analysis. This process involves systematically comparing the strengths and weaknesses of alternatives in order to determine the best course of action, looking at both the costs involved and the potential benefits that could be gained from an investment. By analyzing both sides, investors can make informed decisions about which investments are likely to yield the best returns.

In the context of evaluations, cost-benefit analysis helps in quantifying potential returns and understanding whether the benefits outweigh the costs associated with an investment. This is crucial for making strategic decisions in finance, as it helps in prioritizing investments that maximize profitability and efficiency.

Risk assessment involves identifying and analyzing potential risks associated with investments but does not directly compare costs and benefits to gauge investment worth. Capital budgeting specifically refers to the process of planning and managing a firm's long-term investments, focusing more on the allocation of resources rather than a direct comparison of costs and earnings. Value investing is an investment strategy where an investor selects stocks that appear to be trading for less than their intrinsic or book value, which is more about identifying undervalued stocks rather than the evaluative process of comparing returns to costs.