Lecture 15

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15
Information for
Business
Decision

Learning Objectives
① Examine how information can reduce risk when
making a decision.
② Discuss management’s information requirements.
③ Outline the five functions of an information system.
④ Explain why accurate accounting information and
audited financial statements are important.
⑤ Read and interpret a balance sheet.
⑥ Read and interpret an income statement.
⑦ Describe business activities that affect a firm’s cash
flow.
⑧ Summarize how managers evaluate the financial
health of a business.
2

FIGURE 17-1
How Can Information Reduce Risk When
Making a Decision?
The Relationship Between Information and Risk
3

Making a Decision? (cont’d)
 Information rules
• Information rules based on situational
experience provide guidance in handling
similar situations or circumstances
• Business research continuously looks for
new rules since business conditions are
always changing
4

Making a Decision? (cont’d)
 The difference between data and information
• Data
- Numerical or verbal descriptions that usually result from some
sort of measurement
• Information
- Data presented in a form that is useful for a specific purpose
• Database
- A single collection of data and information stored in one place
that can be used by people throughout an organization to make
decisions
• Knowledge management (KM)
- A firm’s procedures for generating, using, and sharing the data
and information
5

What is a Management Information System?
 Management information system (MIS)
• A system that provides managers and employees
with the information they need to perform their jobs
as effectively as possible
• Purpose: to distribute timely and useful information
to the decision makers who need it
 Information technology officer
• A manager at the executive level who is
responsible for ensuring that a firm has the
equipment necessary to provide the information the
firm’s employees and managers need to make
effective decisions
6

FIGURE 17-2
Management Information System (MIS)
7
Source: Ricky W. Griffin, Management, 10/e (Mason, OH: Cengage Learning, 2011). Reprinted by permission.

What is a Management Information System?
(cont’d)
 A firm’s information requirements
• Summary of future possibilities
• Summary of present situation
• Summary of past performance
• Information about five areas of management:
finance, operations, marketing, human resources,
and administration
 Size and complexity of the system
• Must be properly sized to provide sufficient
information resources without being simple or too
complex to be useful
8

FIGURE 17-3
Five Management
Information System Functions
9
Every MIS must be tailored
to the organization it serves
and must perform five
functions

How Do Employees Use a Management
Information System?
 Collecting data
• Data should be relevant and accurate
• Internal sources
- Managers and employees, company records and reports,
minutes of meetings, accounting data, sales data, HR data,
production data
• External sources
- Customers, suppliers, bankers, trade and business publications,
industry conferences, online computer services, government
sources, firms specializing in gathering data
• Cautions
- The cost of obtaining data from some external sources can be
quite high
- Outdated or incomplete data usually yield inaccurate information
- Check computer data (or information) if you disagree with it
10

Information System? (cont’d)
 Storing data
• An MIS must be capable of storing data until
they are needed
 Updating data
• Manual updating—employee inputs fresh
data into the database
• Automatic updating—MIS updates itself as
data become available
11

 Processing data into information
• The transformation of data into a form
useful for a specific purpose
• Statistics
- A measure that summarizes a particular
characteristic of an entire group of numbers
12

 Presenting information
• Verbal information—list or paragraph form
- A formal business report typically includes an
introduction, the body of the report, conclusions,
and recommendations
• Visual displays
- Graphs, bar charts, pie charts
• Tabular displays
- Verbal or numerical information presented in
columns and rows
13

FIGURE 17-4
Typical Visual Displays Used in
Business Presentations
14

FIGURE 17-4
Typical Visual Displays Used in Business
Presentations (cont’d)
15

Table 17-1
Typical Three-Column Table Used in
Business Presentations
16

Improving Productivity with the Help of
Computers and Technology
 Areas of concern for a business include decision making,
communications, sales, recruiting and training employees,
business software applications, and virtual offices
 Making smart decisions
• Three different applications can help to improve and
speed the decision-making process for people at
different levels within an organization
- Decision support system (DSS) is a type of computer program
that provides relevant data and information to help a firm’s
employees make decisions
- Executive information system (EIS) is a computer-based system
that facilitates and supports the decision-making needs of top
managers and senior executives
- An expert system is a type of computer program that uses
artificial intelligence
17

Lecture 15

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