FINANCIAL DECISION-MAKING
 
    Thirteen aspects of financial decision-making are described below.
 
    COMBINING COST AND PERFORMANCE IN PROJECT CONTROL. A number of
    techniques have been developed to integrate cost and performance
    information in project reports. These techniques make possible accurate
    judgments regarding progress, and reliable projections of completion
    costs and schedules. Among the techniques are "accomplishment/cost" and
    "earned value." The question that can be answered with a thorough
    knowledge of this subject matter is: "How can project cost and
    performance information be collected, presented and used in the most
    useful manner?" (VI.A)
 
    CONSIDERING THE "TIME VALUE OF MONEY." Managers use a variety of methods
    to incorporate into their decisions the knowledge that today's dollar is
    likely to have less real purchasing power in the future. The question
    that can be answered with a thorough knowledge of this subject matter
    is: "What techniques are available to me to include the time value of
    money in financial decisions, and how should I select the most useful
    one in a given situation?" (VI.B)
 
    MAKING CAPITAL-EXPENDITURE DECISIONS. Rate of return, payback, and
    present value are used to evaluate the desirability of potential capital
    investments. In addition to weighing these alternative methods, the
    manager should also consider the process by which capital-expenditures
    are arrived at. The question that can be answered with a thorough
    knowledge of this subject matter is: "How can I make the most effective
    decisions regarding capital expenditures?" (VI.C)
 
    DESIGNING FINANCIAL CONTROL REPORTS. The question that can be answered
    with a thorough knowledge of this subject matter is: "How can I design
    financial reports that provide information to managers in the most
    useful form?" (VI.D)
 
    INTERNAL CONTROL. The systems used to prevent misuse of organizational
    resources come under the general heading of internal control. The
    question that can be answered with a thorough knowledge of this subject
    matter is: "How can I ensure that I have strong and cost-effective
    internal control practices?" (VI.E)
 
    DECISION ANALYSIS. In recent years, techniques have been developed for
    anticipating the future impacts of present decisions, and for
    incorporating such intangibles as uncertain future conditions and value
    judgments into statistical models. These techniques fall under the
    general heading of "Decision Analysis." The question that can be
    answered with a thorough knowledge of this subject matter is: "What
    tools of decision analysis might be most useful for me, and how are they
    applied?" (VI.F)
 
    ASSESSING PROJECT OUTCOME TRADE-OFFS. Virtually any project plan
    reflects decisions about the appropriate trade-offs among time, money,
    and quality. Techniques are available to systematically review those
    trade-offs. The question that can be answered with a thorough knowledge
    of this subject matter is: "How can I best analyze project outcome trade-
    offs?" (VI.G)
 
    ALTERNATIVE BUDGETING APPROACHES. From the straightforward line-item
    budget to the more complex zero-base budget, different budgeting
    techniques serve different purposes. The question that can be answered
    with a thorough knowledge of this subject matter is: "What budgeting
    method meets my needs best?" (VI.H)
 
    PREPARING RELIABLE BUDGETS. As a form of planning, budgets are subject
    to the reliability problems that plague any forecasting-based activity.
    Some systematic techniques have proven helpful to managers in increasing
    the reliability of their budgets. The question that can be answered with
    a thorough knowledge of this subject matter is: "How can I develop
    budgets that are as reliable as possible?" (VI.I)
 
    HUMAN RESOURCE ACCOUNTING. Personnel decisions can be looked at in
    financial terms. The question that can be answered with a thorough
    knowledge of this subject matter is: "How can human resource accounting
    be used to make financially sound personnel decisions?" (VI.J)
 
    ALTERNATIVE FINANCIAL INCENTIVE SYSTEMS. Financial incentives (e.g.,
    bonuses) for managers and employees best serve the organization's
    interests if they are designed to reward the most desired performance.
    The question that can be answered with a thorough knowledge of this
    subject matter is: "How can I design performance criteria and related
    financial incentives so they meet the organization's needs?" (VI.K)
 
    LOCATING FINANCIAL AUTHORITY, RESPONSIBILITY, AND ACCOUNTABILITY IN THE
    ORGANIZATION. Organizations use differing strategies regarding both
    individual authority to commit monies, and ways in which financial
    performance is evaluated. The question that can be answered with a
    thorough knowledge of this subject matter is: "How can the organization
    be structured so that individuals are given proper levels of financial
    authority and are properly held accountable for the financial results of
    their decisions?" (VI.L)
 
    MEASURING SOCIAL PERFORMANCE. Ways of assessing the impact on public
    wellbeing of corporate decisions have been developed to aid managers in
    considering the full financial implications of their decisions. Two
    general approaches in this area are called social auditing and social
    accounting. The question that can be answered with a thorough knowledge
    of this subject matter is: "How can social responsibility considerations
    be incorporated into financial decision-making?" (VI.M)