Decisions Review
Well, hopefully you made it to the end of your journey in one piece.
Let's review what you should now know or at least be familiar with:
- The importance of business decisions.
- The types of business decisions.
- Understand or be familiar with the terms used in analyzing business decisions.
- The steps used to help arrive at good decisions.
- The tools used to aid you in making business decisions.
- How tools such as spreadsheets make your task easier.
- And finally, when to seek help especially for long term decisions that are not easy to recover from a bad decision.
Importance of Business Decisions
Almost every aspect of being in business involves making decisions and choosing between alternatives, and each alternative typically has one or more consequences. Understanding how businesses make decisions paves the way not only to better decision-making processes but potentially to better outcomes.
Types of Business Decisions
Decisions made by businesses can have short-term effects or long-term impacts, or in some situations, both. Short-term decisions often address a temporary circumstance or an immediate need while long-term decisions align more with permanent problem solving and meeting strategic goals. These two types of decisions require different types of analyses and different types of accounting and non-accounting information.
Business Decision Making Steps
The process of decision-making in a managerial business environment can be summed up in these steps:
- Identify the objective or goal. For a business, typically the goal is to maximise revenues or minimise costs.
- Collecting relevant data and understanding the context surrounding the decision.
- Identify alternative courses of action that can achieve the goal or address an obstacle that is hindering goal achievement.
- Perform a comprehensive analysis of potential solutions. This includes identifying revenues, costs, benefits, and other financial and qualitative variables.
- Decide, based upon the analysis, the best course of action.
- Implementing the chosen alternative.
- Review, analyse, and evaluate the results of the decision.
Business Decision Tools Used
- Financial Statement Analysis
- Budgets
- Incremental Analysis
- Contribution Margin Income Statement
- Cost Benefit Analysis
- Break-Even Analysis
- Capital Budgeting
- Sales Mix Analysis
Get Professional Advice
Seek help especially for long term decisions that are not easy to recover from a bad decision !
What's Covered
This review section provides videos as a refresher and exams and practice problems to assess your knowledge. In other words, what stuck to your brain cells. Let's raise a glass and toast to good decision making !