Decision-making Techniques Flashcards
What is centering
a method used to calculate a moving average, where the average is plotted or calculated in relation to the central figure
What is correlation
the relationship between two sets of variables
What is correlation coefficient
a measure of the extent of the relationship between two sets of variables
What is extrapolation
forecasting future trends based on past data
What is the line of best fit
A straight line drawn through the center of a group of data points plotted on a scatter graph
What is moving average
a succession of averages derived from successive segments of a series of values
What is a scatter graph
a graph showing the performance of one variable against another independent variable on a variety of occasions, it is used to show whether a correlation exists between the variables
time-series analysis
a method that allows a business to predict future levels from past figures
What is the average rate of return or accounting rate of return (APR)
A method of investment appraisal that measures the net return per annum as a percentage of the initial spending
What is capital cost
The amount of money spent when setting up a new venture
What is cash inflow
the cash coming into the business such as that from sales or bank loans
What is cash outflow
The cash going out of a business when payments are made to workers or suppliers
What is discounted cash flow (DCF)
a method of investment appraisal that takes interest rates into account by calculating the present value of future income
What is investment
the purchase of capital goods
What is investment appraisel
The evaluation of an investment project to determine whether or not it is likely to be worthwhile
What is net cash flow
Cash inflow minus outflows
What is net present value (NPV)
the present value of future income from an investment project, minus the cost
What is opportunity cost
When choosing between different alternatives, the benefit lost from the next best alternative
What is a payback period
The amount of time it takes to recover the cost of an investment project
What is qualitative
Represented by words
What is quantitative
represented by numbers
What is back data
data obtained from a previous time period
What is chance node
a point on a decision tree diagram where a number of outcomes are possible
What is a decision tree
a technique which shows all possible outcomes of a decision. The names comes from the similarity of the diagrams to the branches of trees
What is expected value
the numerical value of an outcome multiplied by the probability of that outcome happening
What is probability
The chance if an event happening
What is rollback technique
the process of working back through a decision tree calculating expected values at each node
What is critical path
the tasks involved in a project which, if delayed, could delay the project
What is critical path analysis/network analysis
A method of calculating the minimum time required to complete a project, identifying delays which could be critical to its completion
What is earliest start time (EST)
How soon a task in a project can begin. It is influenced by the length of time taken by tasks which must be completed before it can begin.
What is free float
The time by which a task can be delayed without affecting the following task
What is latest finish time (LFT)
The latest time that a task in a project can finish
What is a network diagram
A chart showing the order of the tasks involved in completing a project, containing information about the times taken to complete the tasks
What are nodes
positions in a network diagram which indicate the start and finish times of a task
What is total float
The time by which a task can be delayed without affecting the time needed to complete the project
What is contribution
The amount of money left over from a sale after variable costs have been substracted from revenue. The money contributes to fixed costs and profit
What is contribution costing
The use of contribution to help make decisions based on costs, such as which order to accept
What is contribution pricing
A pricing strategy that involves setting a price that exceeds the value of the variable cost
What are overheads
An overhead cost or expense, indirect cost
What is a total contribution
The amount of money left over from the sale of several units, or an order, after variable costs have been covered.
What is unit contribution
The amount of money left over from the sale of a single unit after variable costs have been covered
