About This Chapter
Financial Data for Strategic Decision Making - Chapter Summary
A full range of factors can affect the decision-making process, so you must have an understanding of these factors to make the best decisions for your organization. This chapter introduces you to how financial data can be used to influence the strategic decision-making process. Our instructors use several of these lessons to show you important accounting concepts, such as determining costs, related formulas, and financial analysis reports. The lessons also go over the vocabulary words and definitions you will need to become familiar with to understand these business concepts. At the close of the chapter, you will be ready to:
- Assess how to make business decisions through the use of accounting concepts
- Measure examples of sunk costs
- Classify examples of opportunity cost and go over related calculations
- Summarize how decision-making can be affected by differential and implicit costs
- Generalize how producers deal with variable costs and fixed costs
- Show relative examples of mixed costs
- Determine the purpose of incremental analysis
- Establish how to determine relevant costs with accepting orders
- Evaluate how make-or-buy decisions can be impacted by relevant costs
- Differentiate how to determine relevant costs for eliminating, replacing, and selling products
- Compare the total costs and average cost of short-run production decisions
- Outline the regression analysis process used in business
1. Using Accounting Concepts to Make Business Decisions
There are several accounting concepts that make up the generally accepted accounting principles (GAAP). Using these principles, managers are better able to read and understand financial statements needed to make business decisions.
2. Sunk Costs: Definition & Examples
In this lesson, sunk costs are defined and evaluated in the context of company decision making. Concepts are illustrated with examples from the construction industry and a small messenger business.
3. Opportunity Cost: Definition, Calculations & Examples
This lesson discusses opportunity costs, a central idea of economics. In addition to examining the general idea of opportunity costs, it also looks at the role of explicit and implicit costs to firms.
4. Differential Cost in Managerial Decision Making
Differential cost calculations are an important part of how managers make the best decisions for their businesses. In this lesson, we'll see how it's used and learn how to a find differential cost.
5. Implicit Costs: Definition & Examples
Not all of the costs a business must consider can be calculated and tracked on a monthly basis. This lesson introduces the concept of implicit costs, including examples and how they differ from explicit costs.
6. Identifying Fixed Costs & Variable Costs for Producers
Ever wonder why the price of brand-name drugs is so much more than generics? Or why all tablet prices seem to congregate at about the same level? This lesson explains those and other mysteries through the lenses of variable and fixed costs.
7. Mixed Costs: Definition & Examples
In this lesson, we'll look at mixed costs. We'll define variable costs and fixed costs, and we'll look at how the two are related to mixed costs. Afterward, you can test your knowledge with a brief quiz.
8. Incremental Analysis: Definition & Examples
Companies often have to make decisions based on vast amounts of data. Incremental analysis allows them to focus on the important information only. In this lesson, we'll learn how to use incremental analysis.
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Other chapters within the Business 316: Strategic Decision Making course
- Introduction to Strategic Decision Making
- Strategic Thinking in Making Business Decisions
- Decision Making Models for Business
- Statistical Tools for Decision Making
- Quantitative Tools for Decision Making
- Technological Support for Strategic Decision Making
- Strategic Decision Making & Risk Management
- Group Dynamics in Strategic Decision Making
- Strategic Decision Making for Managers
- Decision Making in International Businesses
- Analyzing Business Decisions
- Communication in Strategic Decision Making