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DECISION MAKING - Coggle Diagram
DECISION MAKING
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If not stated otherwise, all are per annum basis
Nominal interest rate: per-annum figures of interest rates, even if the interest rate itself is compounded daily, weekly or monthly…
Effective interest rate: Calculated rate that is the true rate. Also quoted in advertisements as :
Annual percentage rate (APR)
Compound annual rate (CAR)
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Includes the purchase of buildings, machinery and equipments
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Net cash flow measures the payments leaving an organisation’s bank account and the receipts that are paid into it
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Studying the interrelationship between cost, volume and profit at various levels of activity
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Relevant cost = Future costs, cashflows and incremental costs.
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Unless the materials have already been purchased and would not be replaced once used. In this case relevant cost is the higher of:
Their current resale value
The value they would obtain if used another way
In your group, discuss and solve
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Involves a decision by an organisation whether it should make a product/carry out an activity with its own internal resources, or whether it should pay another organisation to do it.
N0 limiting factor: the relevant costs for the decision are the differential costs between two options
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