Business Decision Making: Analysis of Financial and Non-Financial Factors

This essay discusses the steps involved in business decision making and analyzes the financial and non-financial factors that influence investment decisions. It includes calculations of net present value and payback period for DD plc, a vegetarian food manufacturing organization in the UK.

Essay On Business Decision
Making

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Calculating Net Present value......................................................................................................3
Calculated of payback period.......................................................................................................4
Analysis of investment decision-making.....................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The business decision-making is the series of steps which are taken by the individuals for
the determination of the best option which is the course of action for meeting the needs. The
given case study is about DD plc which is vegetarian food manufacturing organization operating
in UK. This project will help in the discussion of both the financial and non financial factors
which will aim the decision-making of the organization.
MAIN BODY
Calculating Net Present value
The Net present value is difference between the present value which impacts the cash
flow and the present value of cash which is considered to be factors affecting the flow of
investment appraisals (Hussain, Salia and Karim, 2018). The profitability of the projected
investment of DD plc has been calculated with the help of the following table.
Year
Project A –
Net cash flow
£
PV factor
@ 15%
Discounted
cash
inflows
Project B –
Net cash flow £
PV
factor @
15%
Discount
ed cash
inflows
1 72000 0.870 62609 71000 0.870
61739.13
0
2 78000 0.756 58979 73000 0.756 55198
3 82000 0.658 53916 97000 0.658 63779
4 110000 0.572 62893 118000 0.572 67467
5 125000 0.497 62147 121000 0.497 60158
Total
discounted cash
inflow 300544 308342
Initial
investment 158000 155000

NPV (Total
discounted
cash inflows -
initial
investment) 142544 153342
The above table is able to evaluate that DD plc needs to pay attention to have a higher net
present value. This will help the organization in achieving a higher profitability. This project is
able to show that the information regarding the two project which are A and B has NPV of
142544 and 153342 respectively. As the project B has the higher of the two thus it can be said
that non dairy milk has higher NPV. Thus, it the preferred project of investment.
Calculated of payback period
Payback period is the time which is needed for an investment for recovering the cost of
investment and the time its takes in reaching the break even point of the organizational
operations.
Year
Project A –
Net cash flow £
Cumulative cash
inflows
Project B –
Net cash
flow £
Cumulative
cash inflows
1 72000 72000 71000 71000
2 78000 150000 73000 144000
3 82000 232000 97000 241000
4 110000 342000 118000 359000
5 125000 467000 121000 480000
Initial investment 158000 155000
Payback period 2 2
0.10 0.113
Payback period
2 year and 1
months
2 year and
1months

The calculation of the Payback period is able to highlight that the similarity of the table is
to specify the project having similar payback period. Project A needs to be preferred as per this
calculation.
Analysis of investment decision-making
FINANCIAL FACTORS
Financial there are different factors which affects the decision-making of the organization
which is directly related to evaluation of investments.
Cost :
The cost of the investments made by the organization is considered to be the factor which
impacts the decision-making of the organization. It can be said that due to the higher the cost
incurred in an investment it makes it more risky for the organization for leading it is towards loss
(Mumtaz, Saeed and Ramzan, 2018).
Return :
The return which is the investment of the organization is able to generate is factor which
influences the decision-making of the organization. For an organization having higher return is
something which directly affects their performance.
Liquidity :
Depending on the liquidity of the investment the decision-making of the business towards
the investment changes. This is due to the fact that the having higher liquidity means the
business risk faced by the organization is low.
NON-FINANCIAL FACTORS
The non financial factors are also some times very essential for a business like DD plc
towards its investment appraisals. These factors include the following,
Future Legislations :
The future legislations are the determinant of the current requirements which are
important for the business to meet for ensuring the legal standards in UK. These factors are also
important to be considered as it can change the ways in which the organization behaves (Zada,
Yukun and Zada, 2021).
Industrial standards :

It is also very important for the business of DD plc to meet the market standards of the
industry which is considered to be the good practice. This helps the organization to have ethical
practices.
Staff morale :
Staff morale is the factor which impacts the motivation of the employees which is
directly linked to their productivity thus, it can be said that its affects decision-making.
Relationships :
The relationships that the organization has with suppliers and the customers directly
impacts the organizational performance (8 Factors That Determine the Financial Health of a
Business, 2019). This is the reason it is a very essential factor which impacts the decision of DD
plc.
Business Reputation :
This is definitely a very important factor and concern for the organization which directly
affects the growth of the organization that directly influences the reputation of the business. It
can be said that the reputation of the business impacts the local community (Ibrahim and et.al.,
2021). This is also the reason why the business reputation affects the decision-making of the
organization.
Capabilities of business :
The capabilities of the business can be said as the factors which are linked with the
different areas of management system. Thus, it is very important for the organization to develop
its capabilities which would allow the organization to generate growth. It can be said that the
growth of the organization directly. This is the factor of which affects the decision-making of the
organization regarding its hiring practices and other organizational operations.
Future threats :
These threats of the organization are considered to be that factor which can impact the
decision-making of the organization depending (Derun, 2018). These factors also include the
protection of the intellectual property which is important for the business to conserve which is
important for the business to bring competition in the organization.

CONCLUSION
From the above project it can be concluded that the decision-making of the DD plc needs
to consider the investment as it can improve on the efficiency of both. Out of the two project the
project B of non daily milk is the better one to be considered.

REFERENCES
Books and Journals
Derun, I., 2018. Stakeholder perception of financial performance in corporate reputation
formation. Journal of international studies. 11(3).
Hussain, J., Salia, S. and Karim, A., 2018. Is knowledge that powerful? Financial literacy and
access to finance: An analysis of enterprises in the UK. Journal of Small Business and
Enterprise Development.
Ibrahim, M., and et.al., 2021. The Impact of Cost of Capital on Financial Performance: Evidence
from Listed Non-Financial Firms in Nigeria. Global Business Management Review.
13(2). pp.18-34.
Mumtaz, A., Saeed, T. and Ramzan, M., 2018. Factors affecting investment decision-making in
Pakistan stock exchange. International Journal of Financial Engineering. 5(04).
p.1850033.
Zada, M., Yukun, C. and Zada, S., 2021. Effect of financial management practices on the
development of small-to-medium size forest enterprises: Insight from Pakistan.
GeoJournal. 86(3). pp.1073-1088.
Online
8 Factors That Determine the Financial Health of a Business, 2019[Online]. Available through:
<https://www.entrepreneur.com/article/240611>