3.3.3 Decision trees

Question 1

define decision trees

Answer 1

diagram that represents business decisions - maps out possible options to a business

Question 2

what are 3 positives

Answer 2

-visual representation
-forces managers to quantify the impact of their decisions
-helps managers logically compare options

Question 3

what are 3 negatives

Answer 3

-uses profitability - may be estimated - unreliable
-time lags can occur between drawing tree + executing decision - can impact value
- sudden economic changes may make decision/ time taken to create tree pointless

Question 4

why is the fact it is a visual representation a positive

Answer 4

makes managers think about decisions they’re making and possible consequences