Importance of Decision-Making Process and Investment Appraisal Techniques in Business

INDIVIDUAL ESSAY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ESSAY ............................................................................................................................................1
Decision-making process ............................................................................................................1
Investment Appraisal techniques.................................................................................................1
Financial and Non financial factors in decision making of business. .........................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Decision-making can be defined as process of choices that is concerned with identifying
the right decisions, by gathering informations and assessing the alternative solutions. It is
concerned with making the most effective decisions that are essential for organisation's growth.
The growth and success of the company depends on the decisions it takes. The study is based on
the importance of decision-making process. The decision-making also involves using various
techniques such as investment appraisal techniques for identifying the feasibility of project. The
benefits and limitations of investment techniques will also be explained in the report.
ESSAY
Decision-making process
Decision making is an integral part of business organisation. Management has the key
function of taking a sound, rational and important decisions for the benefit of organisation. It is
an important process as it defines both managerial and organisational activities. Decision are
taken after analysing the circumstances, collecting all the important information related to the
activities to be taken (Wooldridge and Cowden, 2020). The decisions are to be taken at every
management level for ensuring the growth and success of organisation. It refers to making choice
between the most significant alternatives.
Investment Appraisal techniques.
The investment appraisal technique is used by organisations for identifying the feasibility
of projects before making investments in projects. Techniques used in investment appraisals is
Net Present Value, IRR, payback period, and ARR.
Net Present Value
Net present value can be defined as the method in which present value of cash flows is
measured by discounting them at the required rate of return or the discounting rate generated by
project. It involves identifying whether the cash flows will be sufficient for covering the cost of
investments.
Advantages
 The investment technique considers time value of money for checking the feasibility of
projects.
 It is an easy and comprehensive method used for assessing the present value (Weber,
2019).
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