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The existence of a problem implies the need for a

decision maker to make at least one decision, and typically a series of

decisions, to resolve a problem. In the first step, the decision maker sets

the objectives for the decision.

This is the point of ultimate decision making, although

decisions must also be made in the other steps of planning—in

selecting goals, in choosing critical premises, and even in

selecting alternatives.

In a situation involving certainty, people are reasonably sure about

what will happen when they make a decision. The information is

reliable and is considered to be reliable, and the cause and effect

relationships are known.

In a situation with risks, factual information may exist, but it may be

incomplete. To improve decision making, one may estimate the

objective probability of an outcome by using, for example,

mathematical models. On the other hand, subjective probability,

based on judgment and experience, may be used.

This is another tool in decision making used for

estimating the profitability of an investment, calculating the payback

period, and analyzing cash inflows and outflows. Investment

alternatives can be evaluated using a discounted peso analysis of cash

inflows and outflows.

It is an accounting tool used for the interpretation of

accounting information. The basic financial ratios compare costs and

revenue for a particular period. These ratios bring out a relationship

between two financial aspects.

This method used

mathematical techniques for balancing waiting lines and services

provided.

This involves selecting the best strategy, taking

into consideration one’s actions and action of one’s competitors.

Thus, it is a “conflict of interest” situation where one individual tries

to win. McDonald contends that the strategic situation is the theory

which lies in the instruction between two or more individuals, each of

whose actions is based on an expectation concerning the actions of

others over whom he has no control. When one individual wins, the

other losses. Minimizing the maximum loss and maximizing the

minimum gain are two concepts used in the game theory.

This is an interesting technique used in analyzing

a decision. Through a graphic illustration, the alternative solutions

can be identified and probability estimates are assigned to these

alternatives and pay-offs relating to alternatives can be determined.

This tool is used in decision making to figure out

how much more output will result if one or more variable (worker) is

added. Samuelson defines a marginal product as the extra product or

output added by one extra unit of that factor. While other factors are

being held constant. This technique is particularly useful for evaluating

alternatives in the decision making process.