About This Chapter
Short & Long-Term Decision-Making in Accounting - Chapter Summary and Learning Objectives
Making responsible and informed decisions in accounting is essential. The lessons in this chapter will show you how to apply decision-making techniques and approaches. You will learn about determining the relevant information you need to know, formulas for spending and techniques for budgeting. Our instructors can answer your questions, and you may take our lesson quiz to test your knowledge. These lessons will include information like:
- How to determine the costs relevant to decision-making
- What techniques and approaches are used in capital budgeting
- Definitions of cash flow, net present value and time value of money
- Formulas for payback analysis and investment spending
|Relevant & Irrelevant Costs for Decision-Making||Discuss differential, avoidable, opportunity and sunk costs.|
|How to Determine Costs & Make Decisions||Explore how to make decisions by determining costs.|
|What Is Capital Budgeting? - Techniques, Analysis & Examples||Analyze capital budgeting.|
|Discounted Cash Flow, Net Present Value & Time Value of Money||Explain terms like, cash flow, net present value and time value of money.|
|Alternative Approaches to Capital Budgeting Decisions||Examine the payback method and the simple rate of return method.|
|Payback Analysis: Formula & Example||Study examples of payback analysis.|
|Investment Spending: Definition & Formula||Learn to calculate investment spending and find out why it is important in business.|
|Simple Rate of Return Method in Capital Budgeting||See how the simple rate of return can be used for capital budgeting.|
1. Relevant & Irrelevant Costs for Decision-Making
In accounting, there are relevant and irrelevant costs. Relevant costs include differential, avoidable, and opportunity costs. Irrelevant costs include sunk and fixed overhead costs. In this lesson, we will learn about these and calculate them.
2. How to Determine Costs & Make Decisions
Determining costs and making decisions are the most important jobs of a manager. In this lesson, we see just how linked the two practices are for businesses of all sizes.
3. What Is Capital Budgeting? - Techniques, Analysis & Examples
Capital budgeting is important to the growth and development of a business. In this lesson, you will learn what capital budgeting is, why it is important, and how it is used.
4. Discounted Cash Flow, Net Present Value & Time Value of Money
Explore the concept of time value of money and learn about ways to determine the profitability of different investment options using the net present value of the future cash flows, discount rates, and a project profitability index.
5. Alternative Approaches to Capital Budgeting Decisions
Purchasing capital assets requires a significant expenditure, and it must be timed to ensure it does not adversely impact cash flows. In this lesson, you will learn about capital budgeting decisions.
6. Payback Analysis: Formula & Example
Payback analysis is an important financial decision-making tool. In this lesson, you'll learn what it is and how to apply the formula, and you'll see an example of payback analysis. You'll also have a chance to take a short quiz after the lesson.
7. Investment Spending: Definition & Formula
In this lesson, we will explore the term investment spending. We will define it, determine the different types, learn how to calculate it, and discover why it is a necessary part of business.
8. Simple Rate of Return Method in Capital Budgeting
Companies need quick ways to analyze whether or not a potential capital expense is worth their time. That's just what the simple rate of return method provides. In this lesson, we learn how it is calculated and how it is used.
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