Assumptions And Limitations Of Short Term Decision Making

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Introduction: This essay will critically evaluate assumptions and limitations of short term decision-making approaches and tools. It will also cover how ratio analysis can help with decision-making. If a company wants to stay competitive and successful, they need to make informed decisions. The information used to make the decisions is crucial to the business. Short term financial planning is considered over a specific period and provides management with information outlining if they are heading for a surplus or deficit. Forecasting is a technique that allows for short term financial planning. Short term decision-making must be completed with the long term vision in mind. Ratio analysis uses information from financial statements can provide fast representations of financial performance. Both short term decision-making and ratio analysis can be used to make better informed decisions, therefore positioning a company for success. Financial statements and forecasting are tools managers can use when making short term decisions. Ratio analysis is a technique Body: Companies have a continual need to fully understand where they have been, where they are and where they are going. Financial statements and forecasting can help managers make short term decisions. While there are potential limitations to these statements, the shed light on a company’s financial strength. Atrill and McLaney (2011) state that three financial statements provide a snapshot of a company’s performance and

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