ACCOUNTING AND FINANCE Study Guide - Midterm Guide: Gross Margin, Earnings Before Interest And Taxes, Sony Ericsson P990

• School: Harvard University
• Department: Research Methods and Data Analysis, Leadership, Management, and Organizations, Education Policy
• Course: ACCOUNTING AND FINANCE

Document Summary

Making decisions is one of the basic functions of a manager. To be successful in decision making, managers must be able to perform differential analysis, which focuses on identifying the costs and benefits that differ between alternatives. Decision making: six key concepts: key concept #1. Every decision involves choosing from among at least two alternatives. Therefore, the first step in decision-making is to define the alternatives being considered. Once you have defined the alternatives, you need to identify the criteria for choosing: relevant costs and relevant benefits should be considered when making decisions. Irrelevant costs and irrelevant benefits should be ignored when making decisions. 2: key concept #2 among them, key concept #3. The key to effective decision making is differential analysis focusing on the future costs and benefits that differ between the alternatives. Everything else is irrelevant and should be ignored: a future cost that differs between any two alternatives is known as a differential cost.