Business Decision Making Report: Financial and Non-Financial Factors

This report delves into the critical aspects of business decision-making, focusing on key strategies such as Net Present Value (NPV) and payback period analysis. It examines how these financial tools are used to evaluate investment opportunities and project profitability. The report presents calculations for both NPV and payback periods for two hypothetical projects (Project A and Project B), interpreting the results to demonstrate their application in capital budgeting decisions. Furthermore, the report explores the financial and non-financial factors that influence managerial decisions, providing insights into how organizations assess risks, consider market stability, and evaluate the overall viability of potential projects. The conclusion emphasizes the significance of informed decision-making for organizational success, highlighting the interplay between financial metrics and external market dynamics.

Business decision making

Table of Contents
INTRODUCTION...........................................................................................................................3
Main BODY.....................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Decision-making is perhaps a big part of today's corporate administration. The primary
responsibility of management is really to make rational or well-informed decisions. A choice is a
plan of treatment chosen from a collection of alternatives with the intention of achieving
organisational or management objectives. Any business or firm's decision-making mechanism is
also a continuous and necessary aspect of its operations. The thesis addresses important market
decision-making strategies such as the net present value (NPV) process and payback times.
Furthermore, the report discusses both financial and non-financial considerations that can
influence management decisions (Ruzakova, 2020).
Main BODY
NPV: A company's estimate of the expected gain (or loss) from either a project is called the net
present value (NPV). Major corporations must weigh the benefits of introducing programmes
even against benefits of capital preservation. Net present value may be used to calculate amounts
of revenue or to budget for capital spending.
Project A - Belt Project
Year Net Cash-flows Discount Factor @
14%
Present value of net cash
flows
1 45000 0.877 39474
2 45000 0.769 34626
3 35000 0.675 23624
4 70000 0.592 41446
5 82000 0.519 42588
Total Present value
=
181758
Initial Investment = 170000
NPV = 11758
Project B - Trainers
Year Net Cash flows Discount Factor @
14%
Present value of net cash
flows

1 50000 0.877 43860
2 45000 0.769 34626
3 70000 0.675 47248
4 90000 0.592 53287
5 90000 0.519 46743
Total Present value
=
225764
Initial Investment = 190000
NPV = 35764
Interpretation: The NPV of Option 2, 35764, is greater than that of the Net present value of
Project A, 11758, according to the report. This demonstrates that option B is more commercially
feasible.
Payback period: Companies may use payback times to determine various investment prospects
to decide which commodity or program is still most probable to make their money back
throughout the shortest amount of time (Sekścińska and Markiewicz, 2020). While a possible
recovery may not have been a top priority for any company and any situation, it is also an
important factor to consider. This is the amount of time it takes an organisation to recuperate its
initial investment in some kind of a project.
Project A - Belt Project
Year Net Cash-flows Cumulative cash-flows
1 45000 45000.000
2 45000 90000.000
3 35000 125000.000
4 70000
5 82000
Initial Investment 170000
Payback period = 3 years + [(170000 - 125000) / 70000 * 12
months
3 Years + (45000 / 70000) * 12 months
3 years + (0.643 * 12 months)

3 years + 7.71 months
Project B - Trainers
Year Net Cash-flows Cumulative cash-flows
1 50000 50000.000
2 45000 95000.000
3 70000 165000.000
4 90000
5 90000
Initial Investment 190000
Payback period = 3 years + [(190000 - 165000) / 90000 * 12
months
3 Years + (25000 / 90000) * 12 months
3 years + (0.277 * 12 months)
3 years + 3.33 months
Interpretation: The payback time study indicates that Option B, with a shorter payback three
year period as well as 3.33 months, is much more feasible than Project A, so the organisation can
choose Project B.
Financial and non financial factors related with capital budgeting
Net Present Value: XYZ Plc intends to participate in a new project to analyse NPV. Net value
seems to be a financial metric that helps an organisation evaluate the actual value of the output
by calculating the discounting sampling frequency. This technique aids in evaluating whether or
how a program is successful for the company. This technique does have benefits and risks that
will be considered before are using it as a decision-making tool. The biggest benefit of this
experiment is that it acknowledges that time worth of money by measuring decreased values
obtained. NPV is often used to account for the risks that a project can entail (Yuneline and
Suryana, 2020). The limitations of this approach include a lack of knowledge of operational costs
and overly ambitious predictions. If project A's cumulative initial expenditure is £100000, the
development's rate of return is £64194.45. It could be conveniently demonstrated by using
analysis performed in point 2 preceding (npv calculation). Option B, on the other extreme, has a

gross capital investment of £150000 as well as a net present value of £40868.17. Project A has a
higher net present value (NPV) than Option B; a higher NPV indicates that a project is much
more viable, so Project A seems to be more realistic than Proposal B.
Pay back period: The expression "payback period" refers to a tool that is used to decide that
however much time a person can contribute to something like a program. The calculation should
not take into account the value of capital over time. This fiscal metric has its own set of benefits
and drawbacks, although in some circumstances promote and restrict its use. The primary
benefit/advantage of such a strategy is that it becomes simple to compute and makes for a rapid
evaluation/review of the proposal. The inefficiency/defect of that approach is that it lacks the
statistics of negative cash-flows hence avoids the opportunity cost of the residual value.
Non finance factors: There are also many non-financial aspects that can influence a foundation's
decision making in addition to the above practical concerns. Laws relating to industry and
business transformation are examples of such concerns. XYZ Plc should choose projects that do
not impose any protective measure such that they might run smoothly. Moreover, if indeed the
marketplace in which a firm operates is stable, only businesses will consider investing in new
projects to reduce the risk of uncertainty (Zopounidis and et. al, 2018).
CONCLUSION
In the last of report, it is concluded that Decisions are important because they influence both
organisational and institutional activities. Decisions will be made to ensure the smooth execution
of both organisational and institutional activities. The urban development growth factor seems to
have an effect on decision-making and organisations must choose specific projects that will aid
in their industrial prosperity.

REFERENCES
Books and Journals
Ruzakova, O., 2020. Automation of the financial analysis decision-making process on the
Internet. Економіка. Фінанси. Менеджмент: актуальні питання науки і практики.-
Вінниця: ВНАУ, 2020.-№ 2 (52).-С. 52-65.
Sekścińska, K. and Markiewicz, Ł., 2020. Financial decision making and individual dispositions.
In Psychological Perspectives on Financial Decision Making (pp. 135-166). Springer,
Cham.
Yuneline, M.H. and Suryana, U., 2020. Financial Literacy and its Impact on Funding Source’s
Decision-Making. International Journal of Applied Economics, Finance and Accounting,
6(1), pp.1-10.
Zopounidis, C., & et. al, 2018. Financial decision support: An overview of developments and
recent trends. EURO Journal on Decision Processes, 6(1), pp.63-76.