List the four essential elements involved in decision making

Solution

These are the four essential elements:

1) Cash flows: It is the first and most important part of the economic analysis for which the business exists and earned through providing services and selling goods. Thereafter we deduct expenses both operating and capital costs and other adjustments to get cash flows that shows the true picture.

2) Time of the cash flows: the firm is likely to earn cash flows for the over period of time and the time plays a very key role in decision making,

3) Cost of capital : Another major element is the cost of funds that is in terms of cost of equity and cost of debt.

4) Current worth that is nothing but present value of future cash flows that takes account the discount rate and the timing of cash flows.