Decision Trees

Decision Trees

1. Decision-making techniques

2. Aids the decision making; Quantifies the likely outcome of any decision taken using numbers to give a financial return and probability of this outcome; square is a decision point and circle is a probability outcome; applies logic to decision making and can compare ideas

3. Other factors to consider; time scale of options, objectives of the business and risk attitude of the makers;

4. More decisions there are in a tree, the less accurate any expected outcomes are likely to be; probability allows flexibility, encourages clear thinking and planning

5. Data could be out of date and only as accurate as data input; based on expectations; can be easy to read compared to other methods but complex ones, with many branches, can be time consuming and required expertise and experience to get accurate probabilities and returns; doesnt consider qualitative, human resources, motivation reaction, stakeholders.