Decision Making Techniques Flashcards Preview

Business Unit 3 > Decision Making Techniques > Flashcards

Flashcards in Decision Making Techniques Deck (19):
1

Seasonal variation

Change in the value of a variable that is related to the seasons

2

Trend

The general path a series of values follows over time, disregarding variations or random fluctuations

3

Criterion

A yardstick set by directors to enable managers to judge whether investment ideas are worth pursuing

4

Cumulative cash

The build up of cash over several time periods

5

Discounting

Applying a discount factor to take into account the opportunity cost of money over time

6

Present values

The discounting of future cash flows to make them comparable with todays cash. This takes into account the opportunity cost of waiting for cash to arrive

7

Short termism

Making decisions on the basis of the immediate future and therefore ignoring the long term future of a business

8

Tactical decisions

Those that are day to day events and therefore do not require a lengthy decision making process

9

Actual values

Forecasts of the net cash flow which result from following a sequence of decisions and chance events through a decision tree. They should always be shown at the end of the branches.

10

Expected values

Forecast actual values adjusted by the probability of their occurrence. Expected equals actual times probability

11

Net gains

Subtracting the initial outlay from the expected value to find out whether or not a decision is likely to produce a surplus

12

Node

A point in a decision tree where chance takes over. It is denoted by a circle, and at that point it should be possible to calculate the expected value of this pathway

13

Probability

The likelihood of something occurring

14

Critical path

The activities that must be completed on time for the project to finish on time. In other words, they have no float time at all

15

Float time

Any spare time that arises between the completion of an activity and the starting time for the next

16

Management by exception

The principle that because managers cannot supervise every activity within the organization, they should focus their energies on the most important issues

17

Network

A diagram showing all the activities needed to complete a project, the order in which they must be completed and the critical path

18

Network analysis

Breaking a project down into its component parts, to identify the sequence of activities involved

19

Sales forecast

A method of predicting future sales using statistical methods