Business Decision Making

BUSINESS DECISION
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Calculating Payback period for business proposals.....................................................................3
Calculating NPV of the proposals................................................................................................4
Benefits and drawbacks of the payback period and NPV............................................................6
Use of financial and non-financial factors...................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business decision-making is very important topic to be discussed. Without taking
appropriate decisions, no business can survive in market place. This report discusses decision-
making aspect of Genesis & Dreams Ltd. There are NPV and Payback methods, and use of
financial and non-financial factors also has been discussed in this report.
MAIN BODY
Calculating Payback period for business proposals
Payback period basically indicates that total time period which will be required so that the
investment which is made by the company can be recovered (Benamraoui and et.al., 2017).
Using the payback period, following calculation can be made for the Genesis & Dreams Ltd.
which wants to choose between two different business proposals.
For Project A: Payback Period:
Initial Investment: 70000
Year Net Cash Flow(£) Cumulative cash inflow (£)
1 18000 18000
2 16000 34000
3 19000 53000
4 22000
5 37000
Pay Back period as calculated for Project A = 70000- 53000 = 17000. Hence,
= 3 Years + (17000/22000) x 12 Months
= 3 years + 0.8 x 12 months
= 3 years + 9.6 months