Decision Making: Financial Resources
Decision making is a fundamental component in entrepreneuship and affects a variety of elements in business including legal and regulatory issues, political agendas, cultural perceptions, demographic diversity and financial resources. This paper aims at describing how decisions are made and thereby suggest that decision making affects financial resources in business.
In order to achieve the goal, this paper is divided into three segments. The first segment defines key terms used end to end in the paper. In the second part, a description of how decisions are made is provided as well as perfect examples of decision making showing how they affect the financial resources in a business. The last segment restates the thesis as well as the main points as highlighted in the other two sections.
Keywords: entrepreneur, decision making, financial resources
According to the oxford dictionary, an entrepreneur is a person who makes money by starting a small business and more particularly, taking financial risks (Michael, 2008).
Decision making refers to a cognitive process of deciding to do something of paramount importance. In businesses, decisions are made concerning a number of issues including financial decisions as well as other decisions directly affecting the activities of the business (Michael, 2008).
In management, financial resources can be defined as, the inputs in the form of money and in most cases in liquid form that helps in the daily running of the business. In short, financial resources cater for the operation expenses in the business (Pandey, 2011).
How Decisions are made
The detrimental importance of financial decisions to a business is imperative to set up an efficient organization. In most cases, the financial decisions are made by the top financial managers in consultation with the professional, junior staff members in the business.
Decision making is possibly one of the most important catalysts in business. Businesses ranging from large to small enterprises have to make various decisions about their main activities with an aim meeting their ultimate goals and objectives.
At times, decision making can be such a difficult task in business since the resources are always finite while the needs are unlimited. On the other hand, businesses may make decisions but fail to implement such decisions due to the various constraints of the resources.
According to Harrison 2008, there are several steps, which are essential for an effective decision making process. The most important step is to set the business objectives which must be specific, measurable, reliable, and should be achieved in certain duration of time. Secondly, the financial manager searches for alternatives which may be used to meet the business’ ultimate objective. Thirdly, the financial manager compares the alternatives and chooses the most cost effective that would avail the goals of the firm. Fourthly, the financial manager applies the alternative chosen in the organization. After the decision has been implemented in the firm, it is crucial the manager follows up activities and spot checks the weak areas that require improvements.
Most businesses have been successful by following Harrison’s steps in making various financial decisions in their organizations. One of such businesses is an American Company, Walt Disney, which clearly followed the Harrisons model in the purchase of its own television networks, which the top managers thought would continue to increase profitability of the company. The company set out clear objectives as being a market leader in entertainment thereby distributing its products in America. Over the years, it has been able to achieve its objectives and thereby expanding at an alarming rate in the entertainment industry.
Decision making is one of the most important activities in any business since; it assists the business to plan for its resources in an optimal way thereby achieving its objectives in a given period of time. The decision making process involves a sequence of steps as highlighted earlier on in the paper and has actually been fundamental in several businesses including the one pointed out in the paper (Harrison, 2000).
Harrison. (2000). Essence of Decision Making. Retrieved May 10, 2012. from ctuonline.edu: http://ctuonline.edu.
Michael, A. (2008). Oxford Advanced Learners’ Dictionary. New York: Oxford University Press.
Pandey, I. (2011). Financial Management. Mumbai: Vikas Publishing House.