Chapter_27_for_Class - 1 Chapter 27 “Analysis for...

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Unformatted text preview: 1 Chapter 27 “Analysis for Decision Making” 2 Short-Run Decision Analysis and the Management Cycle • Objective 1 – Explain how managers make short-run decisions in the management cycle 3 Short-Run Decision Analysis and the Management Cycle • Readers of financial reports are interested in knowing what happened to produce those particular results – Answer this question using the historical information in these reports • Provides financial and nonfinancial quantitative information – Should be relevant, timely, and presented in a format that is easy to use in decision making 4 Short-Run Decision Analysis and the Management Cycle (cont’d) • Short-run decision analysis – The systematic examination of any decision whose effects will be felt over the course of the next year – Managers frequently take five predictable actions when deciding what to do • First four actions – During the planning stage • Last action – During the reviewing stage 5 Planning • Managers take the following four actions during the planning stage when performing short-run decision analysis 1. Discover a problem or need 2. Identify all reasonable courses of action 3. Prepare a thorough analysis of each possible solution – Identify total costs, savings, and other financial effects 4. Select the best course of action 6 Planning (cont’d) • The following qualitative factors will influence a bank manager’s decision to keep or eliminate a branch location – Competition • Do competitors have a branch office located here? – Economic conditions • Does this branch location benefit the community we serve? – Product or service quality • Can we attract more business because of the service quality of this branch? – Timeliness • Does the branch promote customer service? 7 Executing • Stage in which managers – Must adapt to changing environments – Take advantage of opportunities that will improve the organization’s profitability and liquidity in the short-run • During this stage a bank manager may choose to – Eliminate a branch office • Because costs exceed revenues – Keep a branch office • Because the community expects the organization to provide this service 8 Reviewing • Managers evaluate each decision to determine whether it produced the forecasted results – This is the fifth predictable action when performing short-run decision analysis • If results fell short, managers identify and prescribe corrective action – If the solution is not satisfactory or the problem remains, the management cycle begins again 9 Reporting • Managers prepare reports related to short- run decisions throughout the management cycle – Develop budgets that show estimated costs and revenues related to alternative courses of action – Compile analyses of data that support their decisions 10 Discussion A. What are the five predictable actions frequently taken by managers during short-run decision analysis? 11 Discussion A. What are the five predictable actions frequently...
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This note was uploaded on 02/07/2011 for the course BUS 209 taught by Professor Z.gougoumanova during the Spring '11 term at American University in Bulgaria.

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Chapter_27_for_Class - 1 Chapter 27 “Analysis for...

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