Business Finance

Unit 2:
Managing Financial Resources and Decisions

Task 1

In task one I shall be examining the information needs of different decision makers. This will include the needs of small business owners; owners/managers of private companies and managers or directors of large public companies.

As quoted in Accounting for non-Accounting students by JR Dyson, the term decision will be familiar to you in your everyday life. It means coming to a conclusion about a particular issue, e.g. when to get up in the morning, whether to have tea or coffee for breakfast, or choosing between a holiday and buying some new clothes. Similarly, in a managerial context, decisions have to be taken about whether or not to sell in particular markets, buy some new machinery or spend money on research. (J.R. Dyson)

Decisions in a company will be based on probability testing and by looking at the expected value of a particular project or proposal. The decision making process will be generally be weighed up on the following points.


Forward looking; One-off; Data availability; Net Cash flow; relevant costs; Opportunity costs; Probability testing.

All businesses whether small, private companies or directors of large public companies, will take these pointers in to consideration, some are likely to be considered more than others dependant on the size of the company and it’s needs.

I shall first examine the needs of a small business owner. A small business will at most, generally only have a couple of employees or likely to be a sole trader so will have very little outlay on staff wages, potentially paid weekly and probably minimum wage, or himself a small living wage. A small business must consider it’s fixed costs, which will generally not be considered in any decision making as the costs are a fixed outlay each month, such as heating, lighting, and utilities. Variable costs must be considered, these come in the form of monthly spend on advertising, and costs...