Does it ever seem that business decisions are so complex that you cannot see the truth? You bounce from advantages to disadvantages of a project but are unable to make a decision. You don’t want to lose a good investment opportunity but are wary of making the wrong decision.
Decision makers commonly use the principle of incremental change in calculating relevant cash flows. The same principle helps simplify most other financial decisions. It is called Delta.
For example, if your company is choosing to invest in one of two machines, which differ with respect to purchase price, capacity, life span, operating cost, and flexibility, making a decision can be difficult. Some managers would prefer the machine with the longer lifespan, while some would opt for the machine that offers more flexibility. The arguments of some managers would revolve around the advantages of higher capacity, while the arguments of others would revolve around operating cost. You realize that no consensus can be achieved by focusing on the advantages of either machine.
Which machine should be selected for investment? How can you make the correct decision? How can you substantiate your decision with a rationale?
These complexities in decision making can be managed by incorporating Delta. Delta can help you focus on calculating the difference between the cash flows created by the two machines and determine whether those differences create value for your company. Delta will also help you compare that value to any noncash differences. Therefore, it will be easier for you to identify the machine that will add value, and you will make a correct decision by investing in that machine.
Do you want to minimize the risk of making incorrect decisions and make better decisions using Delta? The Accenture Academy course Simplifying Decision Making with Delta
is the edge you have been seeking. Delta will help you develop the skills you need to quickly calculate the relative merit of competing alternatives using either a spreadsheet or a financial calculator. Thus, Delta will expedite the decision-making process and help you make better decisions for your company.