Decision making environment-risk seeking-neutral-averse, Managerial Accounting

Assignment Help:

Risk seeking: 

A risk seeker is a decision maker who is concerned in the best likely outcome no matter how small the chance that they might take place i.e. he takes high risks in anticipation of high profitability. For such decision maker, the marginal usefulness for wealth is positive and rising.

Risk neutral:

A decision maker is risk neutral when he is concerned with what will be the most probable outcome i.e. he is unconcerned to risk.  For such a decision maker the marginal usefulness of wealth is steady and positive.

Risk Averse:

A decision maker is risk reluctant, when he acts on the supposition that the worst possible outcome will take place, and selects the decision with the least risk possible. For such decision maker, the marginal usefulness of wealth is positive though reducing.

These risk attitudes can be described by:

(i) Risk neutral seeking
(ii) Risk averse
(iii) Risk seeking

Std deviation (δ):

1996_Untitled.jpg

 

Here:

MVt is the monetary value under condition t.
EMV is the predictable monetary value
Pt is the probability of condition t taking place
n is the number of various conditions.

Coefficient of variation

It is an associative measure of risk and it is employed to compare alternatives of various magnitudes depend on their risk return consideration.

C V  =  δ/ EMV
EMV = ε MVt Pt

 


Related Discussions:- Decision making environment-risk seeking-neutral-averse

Budget preparation-monitoring and evaluation , Budget Preparation The ...

Budget Preparation The organization's budget is ready following the acceptance and sanction of the decision packages. Once the budget of organization has been accepted manager

Chicken and hawk game, Chicken and Hawk (dove game) Two players meet at...

Chicken and Hawk (dove game) Two players meet at a one-lane bridge and each must choose whether to cross first or wait for the other. If both play Tough (T), they crash in the

Illustration of marginal profit, Illustration of Marginal profit To ill...

Illustration of Marginal profit To illustrate the computations, suppose that the marginal profit or XE in our model is changed from 3 to 3 + δ1, where δ represents either posit

#Budgets, #Explore the behavioral aspects of budgeting#

#Explore the behavioral aspects of budgeting#

Explain the growth, Explain the growth, index, sectoral, gilt and money mar...

Explain the growth, index, sectoral, gilt and money market methods? (i) What are the key variations among the open ended and close ended methods? What are the plus and minuses

Explain the types of standards, Explain the Types of standards The foll...

Explain the Types of standards The following is the brief description of various types of standards: 1) Basic standards: these are the standards which are assumed to remai

What are selling and distribution expenses, What are Selling and distributi...

What are Selling and distribution expenses? Selling and distribution expenses incurred for the marketing of a commodity, for securing orders for the articles, dispatching goods

What are the stages in the performance budgeting, Stages in the performance...

Stages in the performance budgeting The stages in the performance budgeting is enumerated as follows: 1) Establishment of goals objectives and policies: data collection revi

What is traditional costing, What is traditional costing In traditiona...

What is traditional costing In traditional costing overheads are first related to cost centers (production and service centres) and then to cost object, i.e. production. ABC o

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd