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3.5 The Bigger Picture

PLEASE NOTE: This book is currently in draft form; material is not final.

Learning Objective

  1. Explain how decisions have both financial and ethical considerations.

Financial problems often have quantifiable components (such as maximizing return, revenues, or profits, or minimizing expenses or risk) and calculating these accurately is certainly important to the decision making process. Impact upon the “bottom line” is a key consideration, but it is not the only consideration; relying upon one or two numbers to justify a business decision is usually too narrow in scope. Throughout this book, many of our exercises are indeed simplifications, designed to allow a student to focus on one particular aspect of a financial problem. But we encourage students to think beyond the problems as presented and consider how they might appear in a “real world” situation. Discussion with colleagues and instructors can help to illustrate how the techniques we present might be part of a larger management decision with answers that are not as clear cut.

Since ethical considerations pervade everything we do, each following chapter will have a section in “The Bigger Picture” devoted to ethics. While we can in no way be exhaustive in addressing ethical issues, our hope is to, at a minimum, begin the discussion about what is right and just concerning the financial topics we present.

Key Takeaway

  • Even simple decisions can have far reaching ethical implications.

Exercise

  1. Your friend wants a stick of gum. The pack of gum cost you $1.50, and there are 6 sticks in the pack. How much should you charge your friend? Try to answer this question beyond what is the “textbook” answer!