Cost-utility analysis (CUA) studies are becoming increasingly important due to the need to reduce healthcare spending, especially in the field of trauma and orthopaedics.There is an increasing need for trauma and orthopaedic surgeons to understand these economic evaluations to ensure informed cost-effective decisions can be made to benefit the patient and funding body.This review discusses the fundamental principles required to understand CUA studies in the literature, including a discussion of the different methods employed to assess the health outcomes associated with different management options and the various approaches used to calculate the costs involved.Different types of model design may be used to conduct a CUA which can be broadly categorized into real-life clinical studies and computer-simulated modelling. We discuss the main types of study designs used within each category. We also cover the different types of sensitivity analysis used to quantify uncertainty in these studies and the commonly employed instruments used to assess the quality of CUAs. Finally, we discuss some of the important limitations of CUAs that need to be considered.This review outlines the main concepts required to understand the CUA literature and provides a basic framework for their future conduct. Cite this article: EFORT Open Rev 2021;6:305-315. DOI: 10.1302/2058-5241.6.200115.