Gather data about alternatives, Managerial Accounting

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Gather Data about Alternatives

When potential areas of activity are specified, management must assess the potential growth rate of the activities, the capability of the company to set up adequate market shares, and the cash flows for each another activity for various states of nature. Since decision troubles exist in an uncertain atmosphere, it is necessary to consider certain factors that are outside the decision-makers control, which may occur for each alternative course of action. Such uncontrollable factors are termed as states of nature. Some illustrations of possible states of nature are financial boom, high inflation, recession, the strength of competition, and so on.

The course of action selected by a firm using the information presented above will commit its resources for a lengthy period of time, and the overall place of the firm will be affected within its atmosphere—that is, the products it made, the markets it operates in and its ability to meet future changes. Such decisions dictate the firm's long-run possibilities and hence the type of decisions it can make in the future. These decisions are normally referred to as long-run possibilities and hence the type of decisions it can make in the future. Such decisions are normally termed to as long-run or strategic decisions.  Strategic decisions have a profound effect on the firm's future position, and it is hence necessary that adequate data is gathered about the firm's capabilities and the environment in which it operates. Since of their significance, strategic decisions should be the concern of top management.

Besides strategic or long-term decisions, management should also make decisions which do not commit the firm's resources for a lengthy period of time. Such decisions are known as short-term or operating decisions and are generally the concern of lower-level managers. Short-term decisions are depend on the environment of nowadays, the physical, human and financial resources presently available to the firm.


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