Define the term moving average .

A moving average is a series of averages calculated from successive segments of a series of data to smooth out the data and identify trends.

Define the term extrapolation .

Extrapolation is the prediction of future sales from past data , often done by extending a line of best fit.

Define the term correlation .

Correlation occurs when there is a link between two variables , which may be positive or negative.

True or False? A positive correlation means that as one variable increases, so does the other variable.

True . A positive correlation means as one variable increases, so does the other variable.

What does a scatter graph show?

A scatter graph plots two variables , such as sales volume and advertising, to allow a business to establish if there is any correlation between them.

True or False? Quantitative sales forecasting techniques are useful where the future is expected to significantly differ from what has happened in the past.

False . Quantitative sales forecasting techniques are useful where the future is expected to reflect what has happened in the past.

Define the term line of best fit .

A line of best fit is a line identified on a scatter graph that slopes upwards for a positive correlation, or downwards for a negative correlation.

State the meaning of no correlation .

No correlation means there is no connection between the two variables being compared.

True or False? Businesses can improve the accuracy of sales forecasts by employing experts with excellent market knowledge

True . Businesses can improve the accuracy of sales forecasts by employing experts with excellent market knowledge.

What is meant by the term quantitative data ?

Quantitative data is numerical data that has a value and is measurable .

True or False? Seasonality and the entrance of new competitors can affect the reliability of sales forecasts.

True . Seasonality and the entrance of new competitors can affect the reliability of sales forecasts.

True or False? When drawing a line of best fit you should try to include all data points.

False . When drawing a line of best fit, you should try to include as many data points above the line as below the line. Outlying data should not influence your line of best fit.

Define the term investment appraisal .

Investment appraisal involves comparing the expected future cash flows of an investment with the initial outlay for that investment.

What is the simple payback period ?

The simple payback period is a calculation of the amount of time it is expected an investment will take to pay for itself .

What is the average rate of return (ARR)?

The average rate of return (ARR) compares the average profit per year generated by an investment with the value of the initial outlay .

Define net present value (NPV).

Net Present Value (NPV) evaluates the value of an investment by taking into account the effects of interest rates and time .

True or False? If the NPV of an investment is positive, then the investment is likely to be worthwhile.

True . If the NPV of an investment is positive, then the investment is likely to be worthwhile.

True or False? ARR allows businesses to identify the point at which an investment is paid back and contributing positively to cash flow.

False . The simple payback period allows businesses to identify the point at which an investment is paid back, contributing positively to cash flow

What is discounted cash flow ?

Discounted cash flow is a method used to calculate the present value of future cash flows by discounting (reducing) their future value. It accounts for the time value of money (inflation) and opportunity cost.

True or False? Small changes in the discount rate can significantly impact the calculated net present value.

True . Even small changes in the discount rate can significantly impact the calculated net present value.

What is a decision tree ?

A decision tree is a quantitative method that traces the outcomes of a decision so that the most profitable decision can be identified using estimates and probabilities.

True or False? A decision tree is constructed using estimates, which rarely take full account of external factors and cannot include all possible eventualities.

True . A decision tree is constructed using estimates, which rarely take full account of external factors and cannot include all possible eventualities.

What are the key elements in a decision tree diagram?

The key elements in a decision tree diagram are Decision points Outcomes Probabilities Expected monetary values

True or False? A decision tree considers qualitative elements, such as human resource impacts.

False . A decision tree does not consider qualitative elements such as human resource impacts.

In a decision tree diagram, what is meant by the term node ?

In a decision tree diagram, a node is a circle that represents a point where there are different outcomes .

True or False? In a decision tree, points where decisions need to be made are represented by circles.

False . In a decision tree, points where decisions need to be made are represented by squares .

Define the term probability .

Probability is the likelihood of an outcome occurring in a decision tree diagram.

True or False? A certain outcome has a probability of 0.

False . A certain outcome has a probability of 1. An impossible outcome has a probability of 0.

True or False? The time lag between constructing a decision tree and implementing the decision is likely to affect the reliability of the expected values.

True . The time lag between constructing a decision tree and implementing the decision is likely to affect the reliability of the expected values.

What is critical path analysis ?

Critical path analysis is a project management tool that uses network analysis to plan complex and time-sensitive projects.

What does critical path analysis show?

Critical path analysis shows: The order in which activities must be completed The longest path of project activities to completion The earliest and latest times each activity can start and finish without delaying the project Activities that can be carried out simultaneously

Define the term node in critical path analysis.

In critical path analysis, a node is a circle that represents a point in time where an activity is started or finished in a network analysis diagram.

What is an activity in critical path analysis?

An activity is a process or task within a project that takes time, shown as a line linking nodes in a network analysis diagram.

Define the term duration in critical path analysis,

Duration is the length of time taken to complete an activity , shown as a number of time units below the activity line in a network analysis diagram.

True or False? The critical path highlights those activities that determine the length of the whole project.

True . The critical path highlights those activities that determine the length of the whole project.

What is float time in critical path analysis?

Float time is the spare time available for an activity so that the overall project completion is not delayed.

Define the term total float .

Total float refers specifically to the spare time that is available so that the overall project's completion is not delayed .

True or False? Network analysis guarantees the success of a project.

False . Network analysis does not guarantee the success of a project.

A LevelBusinessEdexcelFlashcards3. Business Decisions & Strategy3.3 Decision-Making Techniques

3.3 Decision-Making Techniques (Edexcel A Level Business)

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Cards in this collection (42)

Define the term moving average.
A moving average is a series of averages calculated from successive segments of a series of data to smooth out the data and identify trends.
Define the term extrapolation.
Extrapolation is the prediction of future sales from past data, often done by extending a line of best fit.
Define the term correlation.
Correlation occurs when there is a link between two variables, which may be positive or negative.
True or False?
A positive correlation means that as one variable increases, so does the other variable.
True.
A positive correlation means as one variable increases, so does the other variable.
What does a scatter graph show?
A scatter graph plots two variables, such as sales volume and advertising, to allow a business to establish if there is any correlation between them.
True or False?
Quantitative sales forecasting techniques are useful where the future is expected to significantly differ from what has happened in the past.
False.
Quantitative sales forecasting techniques are useful where the future is expected to reflect what has happened in the past.
Define the term line of best fit.
A line of best fit is a line identified on a scatter graph that slopes upwards for a positive correlation, or downwards for a negative correlation.
State the meaning of no correlation.
No correlation means there is no connection between the two variables being compared.
True or False?
Businesses can improve the accuracy of sales forecasts by employing experts with excellent market knowledge
True.
Businesses can improve the accuracy of sales forecasts by employing experts with excellent market knowledge.
What is meant by the term quantitative data?
Quantitative data is numerical data that has a value and is measurable.
True or False?
Seasonality and the entrance of new competitors can affect the reliability of sales forecasts.
True.
Seasonality and the entrance of new competitors can affect the reliability of sales forecasts.
True or False?
When drawing a line of best fit you should try to include all data points.
False.
When drawing a line of best fit, you should try to include as many data points above the line as below the line. Outlying data should not influence your line of best fit.
Define the term investment appraisal.
Investment appraisal involves comparing the expected future cash flows of an investment with the initial outlay for that investment.
What is the simple payback period?
The simple payback period is a calculation of the amount of time it is expected an investment will take to pay for itself.
State the formula to calculate the simple payback period.
Formula.
$Simple payback period = \frac{Initial outlay}{Net cash flow per period}$
What is the average rate of return (ARR)?
The average rate of return (ARR) compares the average profit per year generated by an investment with the value of the initial outlay.
State the formula used to calculate average rate of return (ARR)
Formula.
$Average rate of return = \frac{Average annual return}{Initial outlay} \times 100$
Define net present value (NPV).
Net Present Value (NPV) evaluates the value of an investment by taking into account the effects of interest rates and time.
True or False?
If the NPV of an investment is positive, then the investment is likely to be worthwhile.
True.
If the NPV of an investment is positive, then the investment is likely to be worthwhile.
True or False?
ARR allows businesses to identify the point at which an investment is paid back and contributing positively to cash flow.
False.
The simple payback period allows businesses to identify the point at which an investment is paid back, contributing positively to cash flow
What is discounted cash flow?
Discounted cash flow is a method used to calculate the present value of future cash flows by discounting (reducing) their future value. It accounts for the time value of money (inflation) and opportunity cost.
True or False?
Small changes in the discount rate can significantly impact the calculated net present value.
True.
Even small changes in the discount rate can significantly impact the calculated net present value.
What is a decision tree?
A decision tree is a quantitative method that traces the outcomes of a decision so that the most profitable decision can be identified using estimates and probabilities.
True or False?
A decision tree is constructed using estimates, which rarely take full account of external factors and cannot include all possible eventualities.
True.
A decision tree is constructed using estimates, which rarely take full account of external factors and cannot include all possible eventualities.
What are the key elements in a decision tree diagram?
The key elements in a decision tree diagram are
- Decision points
- Outcomes
- Probabilities
- Expected monetary values
State the formula to calculate the expected monetary value.
Formula.
Expected monetary value =
$(Expected value of success \times probability) + (Expected value of failure \times probability)$
True or False?
A decision tree considers qualitative elements, such as human resource impacts.
False.
A decision tree does not consider qualitative elements such as human resource impacts.
In a decision tree diagram, what is meant by the term node?
In a decision tree diagram, a node is a circle that represents a point where there are different outcomes.
True or False?
In a decision tree, points where decisions need to be made are represented by circles.
False.
In a decision tree, points where decisions need to be made are represented by squares.
Define the term probability.
Probability is the likelihood of an outcome occurring in a decision tree diagram.
True or False?
A certain outcome has a probability of 0.
False.
A certain outcome has a probability of 1. An impossible outcome has a probability of 0.
True or False?
The time lag between constructing a decision tree and implementing the decision is likely to affect the reliability of the expected values.
True.
The time lag between constructing a decision tree and implementing the decision is likely to affect the reliability of the expected values.
What is critical path analysis?
Critical path analysis is a project management tool that uses network analysis to plan complex and time-sensitive projects.
What does critical path analysis show?
Critical path analysis shows:
- The order in which activities must be completed
- The longest path of project activities to completion
- The earliest and latest times each activity can start and finish without delaying the project
- Activities that can be carried out simultaneously
Define the term node in critical path analysis.
In critical path analysis, a node is a circle that represents a point in time where an activity is started or finished in a network analysis diagram.
What is an activity in critical path analysis?
An activity is a process or task within a project that takes time, shown as a line linking nodes in a network analysis diagram.
Define the term duration in critical path analysis,
Duration is the length of time taken to complete an activity, shown as a number of time units below the activity line in a network analysis diagram.
True or False?
The critical path highlights those activities that determine the length of the whole project.
True.
The critical path highlights those activities that determine the length of the whole project.
What is float time in critical path analysis?
Float time is the spare time available for an activity so that the overall project completion is not delayed.
Define the term total float.
Total float refers specifically to the spare time that is available so that the overall project's completion is not delayed.
What is the formula to calculate total float?
Formula.
$Total float = LFT for the activity - Duration of the activity - EST for the activity$
True or False?
Network analysis guarantees the success of a project.
False.
Network analysis does not guarantee the success of a project.