Business Decision Making: Factors and Tools for Effective Decision Making

This essay explains the factors and tools involved in effective business decision making. It discusses the importance of payback period, net present value, and monetary and non-monetary factors in decision making. The essay uses the example of AJ plc, a chocolate manufacturing organization, to illustrate how these tools can be applied in practice. Subject: Business, Course Code: N/A, Course Name: N/A, College/University: N/A

Business Decision
Making

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business dynamics allude to the means accomplished to achieve business dreams.
Businesses need to make choices in a cutthroat market. These methods include setting goals and
objectives from the beginning and then finding various ways to achieve those goals. The
principal of the business needs to choose a venture capital arrangement from a variety of options
that are readily available to view (Bakumenko and Sigal, 2018). This report explains how these
choices are made in areas of interest for the various tasks that organizations may propose. It also
features taking advantage of the various bookkeeping equipment involved in the key directors in
the making choices.
MAIN BODY
AJ plc, a chocolate manufacturing organization, wanted to devote resources to vegan-related
tasks. Key directors have thought of two businesses that are assembling chocolate or vegan
spreads for vegan lovers. The organization has not yet determined which enterprise to direct its
resources to. To assist key directors, a further examination of the elements influencing the
association's decision-making has been undertaken. These devices help important executives
understand the profitability of the mission.
The payback period implies the time span over which financial backers will recoup their
potential speculative fees. For this report, AJ plc was the financial backer and needed to draw an
immediate conclusion as to which mission of the venture capital would handle its potential
speculative behaviour. Every business has many options where resources can be invested (Liu,
Zhang and Zhang, 2022). The compensation period helps the business understand how quickly
the organization will recoup the cost of the risk. The return time of the two companies is:

The organization's compensation period for dedicating resources to Project B is 2 years
and 2.33 months.
Net Present Value (NPV) is a tool in bookkeeping assumptions that finds out the ongoing
value of all future earnings of a business. The device helps directors draw conclusions about how
the organization will perform in the future if it takes on this particular task (Wang, Peng and
Wang, J.Q., 2018). It shows the benefits of the task. Below is the calculation of NPV for AJ plc.

Calculation of PV cash flow for project A
The net present value of the investments in project A is 153,059 pounds.
Calculation of PV cash flow for project B
The net present value of the project B's interest is £145,493.
Monetary and non-monetary factors alike influence the decision-making of companies in this
area, and they need to determine which companies to direct their resources to. Monetary
elements include assets in the country in which the organization operates, currency-related
preconditions, expansion rates, and recessions. The non-monetary factor that influences business
decision-making is the environment in which the business operates (Zhan, Jiang and Yao, 2020).

customers and so on. Important executives must have a solid understanding of these variables to
make the best choices.
Analysis and Decision-making
Payback Period: As mentioned above, the indemnity period is the time during which the
organization accepts its potential speculation. The shorter this time frame, the more practical the
adventure will be. Fewer recovery periods are seen as better for business. Looking at the above
estimates of the compensation period, the compensation period for Project B and the Vegetarian
Net Present Value is relatively short, 2 years and 2.3 months. The compensation period for
Project A is larger, 2.4 years. Therefore, Item B is more suitable for the return period.
Net Present Value: From the above conversation, one might say that the longer the recovery
period, the better, as it shows ongoing value that represents future income. The higher the NPV,
the more aggressive the business. The above NPV calculation shows that Project A has a higher
NPV than Project B. This means that item A, vegan lover chocolate is more beneficial to the
business. Therefore, Project A is more reasonable, with an NPV of 153,059 lbs.
Financial and Non-financial factors: These factors also affect the dynamics of AJ plc. Brexit
mainly affects AJ plc's decision-making as the organisation needs to manage more import costs,
which increases creation costs. Other non-monetary variables that influence AJ plc's decision to
produce are the huge development of vegan-lover’s chocolate, as buyers' inclinations continue to
change. Subsequently, project A is more feasible due to the changing preferences of buyers.
Liquid resources are resources that can be quickly turned into cash. The organization's
main focus is maintaining an appropriate level of liquidity. Expansion is characterized by a broad
expansion of cash costs. Major expansions in market item rates have affected the availability of
cash by public authorities. It affects the purchasing power of customers (Zhang and et.al., 2022).
Next are the factors that inadvertently affect the interaction of the results: each country
adheres to the guidelines and guidelines set by its chief. Businesses are affected by fundamental
changes in government. For example, rising tariff rates constrain retail organizations, thereby
reducing functional productivity. The association's technology should be generic enough for
changes to affect the organization's interests
CONCLUSION
From the aforementioned reports, it can be well deduced that various accounting
assumptions contribute to the decision-making of the business. Compensation duration, net

present value, monetary and non-monetary factors influence and help key directors select a task
from a pool of options to devote resources to. If AJ plc presupposes the compensation period as
an independent direction, then, at this point, Project B is more reasonable. Project A is more
practical if the organization guarantees NPV as the basis. Vegan lover chocolate is really
overbearing when it comes to non-monetary elements, so AJ plc should go with item A.

REFERENCES
Books and Journals
Bakumenko, M. and Sigal, A., 2018. Reputation aspects in investment decision making:
contribution to corporate security. International Journal of Risk Assessment and
Management, 21(1-2), pp.111-134.
Liu, H., Zhang, Z. and Zhang, T., 2022. Shale gas investment decision-making: Green and
efficient development under market, technology and environment uncertainties. Applied
Energy, 306, p.118002.
Wang, L., Peng, J.J. and Wang, J.Q., 2018. A multi-criteria decision-making framework for risk
ranking of energy performance contracting project under picture fuzzy
environment. Journal of cleaner production, 191, pp.105-118.
Zhan, J., Jiang, H. and Yao, Y., 2020. Three-way multiattribute decision-making based on
outranking relations. IEEE Transactions on Fuzzy Systems, 29(10), pp.2844-2858.
Zhang, L and et.al., 2022. A dynamic and integrated approach of safety investment decision-
making for power grid enterprises. Process Safety and Environmental Protection, 162,
pp.301-312.