Business Decision Making

This document discusses the process of business decision making, including measuring validity, analyzing options, and choosing a path. It explores the use of payback period and net present value in decision making. The document also highlights the importance of considering both financial and non-financial factors in decision making.

Business Decision Making

Essay
The business decision-making is a gradual move that allows experts to address problems by
measuring validity, analyzing options, and choosing a path from that. This marked circle also
offers an opportunity towards the end to examine whether the choice was the right one. To
resolve a choice, the organization should first make a difference whether an organization needs
to address or the research it needs to respond to. Their choice is unique. In the event that they
identify the issue to be addressed, or if the issue they have chosen is too broad, the group will
reject the chosen train before it even leaves the station (Brigham and Houston, 2021).
Decision making based on Payback period
Payback period method is based on the criteria that project having less payback period is better.
Because this will cover the invested amount quicker.
Year Project A – Belt Project Cumulative
Net cash flow £ cash flow
0 -£ 170,000 -£ 170,000
1 £ 45,000 -£ 125,000
2 £ 45,000 -£ 80,000
3 £ 35,000 -£ 45,000
4 £ 70,000 £ 25,000
5 £ 82,000 £ 107,000
Payback = 3 + (45,000 / 70,000)
3.64 years
Year Project B –Trainers Project Cumulative
Net cash flow £ cash flow
0 -£ 190,000 -£ 190,000
1 £ 50,000 -£ 140,000
2 £ 45,000 -£ 95,000
3 £ 70,000 -£ 25,000
4 £ 90,000 £ 65,000
5 £ 90,000 £ 155,000
Payback = 3 + (25,000 / 90,000)
3 + 0.278
3.28 years

Based on above payback calculation, Project B should be selected as it is taking less time to
cover initial investment amount compare to Project A. Hence, firm should decide to choose
Project B.
Net Present Value
It is based on discounted cash flow method, where existing cash inflows are discounted at fixed
rate. Positive value of NPV is preferred for acceptance.
Year Project A – Belt Project
Discount rate
@14%
Net cash flow £
0 -£ 170,000 -£ 170,000
1 £ 45,000 0.877 £ 39,473.68
2 £ 45,000 0.769 £ 34,626.04
3 £ 35,000 0.675 £ 23,624.00
4 £ 70,000 0.592 £ 41,445.62
5 £ 82,000 0.519 £ 42,588.23
NPV £ 11,758
Year Project B –Trainers Project
Discount rate
@14% DCF
Net cash flow £
0 -£ 190,000 -£ 190,000
1 £ 50,000 0.877 £ 43,859.65
2 £ 45,000 0.769 £ 34,626.04
3 £ 70,000 0.675 £ 47,248.01
4 £ 90,000 0.592 £ 53,287.22
5 £ 90,000 0.519 £ 46,743.18
NPV £ 35,764

The above result shows that Project B has more positive NPV compare to Project A, hence
Project B should be selected for investment.
Financial and non-financial factors
The decision-making process for profitability is amazing and goes beyond the financial scene.
Any information that helps leaders see and limit vulnerabilities and risk must be of value.
"Personal business objectives are usually large in number and cannot be measured effectively, as
well as being long-term and unreasonable (Plaskova, Prodanova and Reshetov, 2020). In terms
of costs and benefits not considered in figures money Methods should be used primarily as a
guide, or status, and a number of variables that may affect the vulnerability analysis should be
considered. Some dynamic interaction and additional data are required. So, no matter whether
the financial situation is very optimistic, avoiding some of the subject view can cause difficult
problems.1 The step should include a wide range of test measures capital planning, if monetary,
as an approach to all the angles that may affect feasibility (Shapiro and Hanouna, 2019).
The financial and revenue data of an organization are critical to an organization’s value, non-
monetary elements can make an organization unstable. To be sure, non-monetary factors
consistently represent a definite moment of agreement. A common problem with small and
medium-sized organizations is the extent to which the owner contributes to the group (Madura,
2020).
Institutions and banks consider various financial elements before choosing to invest in a
business. There are various visual aids to help the director cope with the current situation. These
tools include: money saving benefit analysis, risk benefit analysis, risk money saving benefit
analysis, project financial reasoning, opportunity costs and volatility limits. It is not
recommended that these strategies produce accurate results, but simply find something of the
underlying valuation (Banerjee, 2015).
By including questions on the ability to determine the general rules for assessing the validity of a
financial component, it is suggested that some cases may be subject to sufficient financial
elements based on cost and benefits, the estimate considers everything immediately and indirect
costs and benefits (Ameliawati and Setiyani, 2018). It should also be recognized that the
calculation must include a feature that takes into account the risk that the commitment is not

complete. Such a factor could be complex, which includes salaries for all the best views of the
financial situation that could make a campaign fiasco (Karadag, 2015).
It is the interaction between which administrators or lenders choose if, when and how to burn
money in the business. At the heart of all business testing is the realization of the benefits of
going through cash, as opposed to the pros and cons. If done incorrectly, it could hinder the
development of the lender or the association (Jones et al 2018). The major improvement in
starting to evaluate the company is recognized evidence of the cost and benefits involved. This
advancement requires remarkable involvement and insight as expected and to a large extent this
interpretation is further constrained by the fact that “venture capital valuation is close to work
and the father of attractive science”. Thus it is said that the methods of assessing profitability can
never replace administrative judgment, but can help to make the judgment more robust
(Yuniningsih, Pertiwi and Purwanto, 2019).

References
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