3.3.3 Decision Trees

Question 1

What are decision trees

Answer 1

These are a method of tracing alternative outcomes from a range of business decisions, options or projects.

Question 2

What is the purpose of decision trees

Answer 2

They are to analyse an expected financial or different decisions based on the probability of an outcome occurring.

Question 3

What ares some benefits of decision trees

Answer 3

• clarifies the possible course of actions
• adds financial data
• accounts for risks

Question 4

What are some drawbacks of decision trees

Answer 4

• probabilities are often estimated
• doesn’t use qualitative data
  Doesn’t account for the dynamic nature of business

Question 5

What are some influences in decisions?

Answer 5

• objectives and mission of the business
• ethics, using a moral compass
• level of risk
• external influences