Question

In: Accounting

Describe and identify what information is relevant to any business decision.

Describe and identify what information is relevant to any business decision.

Solutions

Expert Solution

A business decision is not an easy task. It requires a careful and cautios analysis of all the aspects of the business for delivering a fruitful business decision.

The most relaevant information for any business decision are as follows-
1. Historical information-
If the decision is already made and implemented in the past, then we should analyse whether such decision was a success or failure in the past. If the decision is not made by the entity till date, then we should analyse whether such decision made by any other firm in the same industry was successful or not.

2. Industry and market information
Before making any business decision, the entity must collate all the information from the industry and market in which it is operating. Whether the product or service it is going to deal in the future, will be in huge demand.

3. NPV Analysis
NPV analysis is the net present value of all future cash inflows as reduced by future cash outflows. If the NPV is positive, it is good sign for accepting the business decision and vice-versa.

4. CVP and Income Analysis
Whether the cost which is incurred is able to provide the expected volume of production and the amount of income it is generating is sufficient to meet the objectives of the business decision.

5. Personnel
The human resource is one of the major component of any business entity. The ability of these resources to adapt for a change and there acceptance is most relevant for implementing a business decision and making it a successful one.


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