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Financial Goals in Decision Making
Several of the common business goals are to earn a profit, pay obligations on time, increase the owner equity, and assume reasonable risks. As described on another page, decision making can be described as identifying and pursuing the alternative that best achieves one's goals. This section of the course focuses on how to assess the likelihood that the business' alternatives will achieve the owners' financial goals.
The discussion reviews the basic financial statements (income statement, cash flow, and balance sheet) and how they help assess progress towards the business' financial goals. Several related topics are addressed: accounting profit, depreciation and opportunity cost.
The next several topics emphasize thought processes for assessing the profitability of alternatives. The final page of this section addresses the idea that profits earned in the future are less valuable than profits earned today (time value of money and discounting to present value). The last two topics consider cash flow and risk to assure the manager thinks about more than just profit.
The next page addresses financial statements as tools to measure progress toward financial goals.
Last Updated September 8, 2010
Email: David.Saxowsky@ndsu.edu
This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.
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