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Edexcel A-Level Business 9BS0
Meeting Customer Needs
Marketing Mix and Strategy
Managing People
Entrepreneurs and Leaders
Financial Planning
Managing Finance
Resource Management
External Influences
Business Objectives and Strategy
Decision-Making Techniques
Influences on Business Decisions
Assessing Competitiveness
Globalisation
Global Markets and Business Expansion
Global Marketing
Global Industries and Companies
Decision-Making Techniques
- 4 subtopics
- 28 things to know
- Paper 2 and Paper 3
What Decision-Making Techniques covers
Decision-making techniques is the third section of Theme 3. It covers the quantitative tools a business uses to choose between options: forecasting what will sell, judging whether an investment pays back, weighing outcomes against their probability, and scheduling a project so nothing waits unnecessarily.
Where it is assessed
Paper 2 and Paper 3
Theme 3, examined on Business activities, decisions and strategy, then the pre-released synoptic paper.
Check the Pearson Edexcel specification ↗The 4 subtopics
Each one has its own page.
- Quantitative sales forecastingMoving averages, scatter graphs and lines of best fit, extrapolation, and the limitations that come from relying on past data.Open →
- Investment appraisalPayback period, average rate of return and net present value, how each is calculated, and what each one ignores.Open →
- Decision treesNodes and branches, expected monetary value and net gain, and the strengths and limitations of putting probabilities on business outcomes.Open →
- Critical Path AnalysisNetwork diagrams, earliest start and latest finish times, total float, and identifying the path that decides the length of a project.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Process
What is extrapolation, what does it assume, and why does it become less reliable over time?
Evaluation
What limits a quantitative forecast?
Process
What types of qualitative factors do quantitative forecasting methods ignore?
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How is the payback period calculated when payback falls mid-year?
Numbers
What does the average rate of return measure, and how is it calculated?
Numbers
How is the total profit of an investment calculated, and when is a project accepted using ARR?
Evaluation
What are the limitations of the payback method?
Evaluation
Why is selecting an appropriate discount rate a limitation of NPV?
Numbers
How should payback results be interpreted in terms of acceptability?
Key term
What is a decision tree, and what do its nodes represent?
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How are expected monetary value and net gain calculated?
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How is a decision tree solved?
Key term
How are inferior options shown on a decision tree after backward induction?
Key term
Under what circumstances can decision trees become overly complex?
Key term
What is Critical Path Analysis, and what is the critical path?
Numbers
What is the earliest start time, and what happens if the critical path slips?
Numbers
What is total float, and how is it calculated?
Key term
What aspect of project performance does CPA fail to measure?
Key term
What financial aspect of project management is not directly addressed by CPA?
Numbers
State the four-quarter moving-average formula.
Numbers
State the present-value formula.
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State the three-period moving-average formula.
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State the mid-year payback formula.
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State the ARR formula.
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State the expected-monetary-value formula.
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State the decision-tree net-gain formula.
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State the total-float formula.
Take Decision-Making Techniques further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Expected value vs Net gain
Expected value: the sum of each outcome multiplied by its probability. Net gain: that figure less the cost of the option that produced it.
Decision tree vs Critical path analysis
Decision tree: a diagram setting out options, probabilities and payoffs to compare choices. Critical path analysis: a diagram identifying the sequence of tasks that determines the shortest project time.
Total float vs Free float
Total float: how long a task can be delayed without delaying the whole project. Free float: how long a task can be delayed without delaying the next task.
Questions from this topic
Each one with the model answer underneath.
- 1
How does a moving average reveal the underlying trend in sales data?
Model answer
It smooths out fluctuations by calculating the mean of a set number of consecutive periods, removing short-term variations to show the general direction of sales over time.
- 2
State the formula for calculating a three-period moving average.
Model answer
3-period MA = (Y₁ + Y₂ + Y₃) ÷ 3, where Y₁, Y₂, and Y₃ are three consecutive data points.
- 3
What does each term represent in the three-period moving average formula?
Model answer
Y₁, Y₂, and Y₃ represent three consecutive data points (such as sales figures for three consecutive months or years), and dividing by three gives the average.
- 4
Calculate the three-period moving average when first period value = 490, second period value = 150, third period value = 180.
Model answer
Three-period moving average = (490 + 150 + 180) ÷ 3 = 273.
- 5
State the formula for calculating a four-quarter moving average.
Model answer
4-quarter MA = (Q₁ + Q₂ + Q₃ + Q₄) ÷ 4, where Q₁ to Q₄ are four consecutive quarterly data points.
- 6
When would a business use a four-quarter moving average rather than a three-period moving average?
Model answer
When analysing quarterly sales data to smooth out seasonal variations that occur across the four quarters of a year.
What is inside Levo
Six ways to work the same material.
Decision-Making Techniques revision questions
- What does Decision-Making Techniques cover in Edexcel A-Level Business?
- 4 subtopics: quantitative sales forecasting, investment appraisal, decision trees and critical path analysis. Each one has its own page with questions and model answers.
- How is Decision-Making Techniques organised?
- By the Edexcel 9BS0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Decision-Making Techniques, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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