An Introduction to Managerial Decision Making Essay -- Business Manage

An Introduction to Managerial Decision devisingPhar-Mor, Inc., the nations largest discount drugstore chain, filed for bankruptcycourt certificate in 1992, following discovery of one of the largest business fraud and misapplication schemes in U.S. history. Coopers and Lybrand, Phar-Mors formerauditors, failed to detect inventory inflation and separate financial manipulations thatresulted in $985 million of earnings overstatements over a three-year period.A federal jury unanimously found Coopers and Lybrand liable to a crowd ofinvestors on fraud charges. The successful plaintiffs contended that Gregory Finerty,the Coopers and Lybrand partner in charge of the Phar-Mor audit, was peckish forbusiness because he had been passed over for additional profit-sharing in 1988 forfailing to cheat on enough of the firms service (Pittsburgh Post-Gazette, February 15,1996). In 1989, Finerty began selling services to relatives and associates of Phar-Mors president and CEO (who has been sentenc ed to prison and fined for his partin the fraud). Critics hire Finerty may have become too close to client circumspectionto maintain the professional skepticism necessary for the conduct of an independentaudit.The Phar-Mor flake is just one of many in which auditors have been held accountablefor testimony of faulty financial statements. Investors in the MiniscribeCorporation maintained that auditors were at least partially responsible for the nowdefunctcompanys falsified financial statements at least one jury agreed, holding theauditors liable to investors for $200 million. In the awaken of the U.S. nest eggandloan crisis, audit firms faced a barrage of lawsuits, paid hundreds of millions injudgments and out-of-court settlements for their involvement in the financial reportingprocess of savingsandloan clients that eventually failed.The auditing partners of Coopers and Lybrand, like partners of other firms heldliable for such negligence, be very bright people. In addition, I believe that they are mainly very honest people. So, how could a prominent auditing firm with a report cardfor intelligence and integrity have overlooked such large misstatements in Phar-Mors financial records? How could auditors have failed to see that so many of theirsavings-and-loan clients were on the brink of failure? Critics of the profession suggest... ...fluenced by decisionresearch has been behavioural finance. In the last decade, we have learned agreat have close the mistakes that investors commonly make. This chapter will explorethese mistakes and apply the messages of the book to attend to readers become wiserinvestors.Chapter 8. This chapter outlines a material to help the reader think abouttwo-party negotiations. The focus is on how you can make decisions to maximize the interchangeable soak up available in a two-party decision-making situation, while concurrentlythinking about how to obtain as much of that joint gain as possible for yourself.Chapter 9. This ch apter looks at the judgmental mistakes we make in negotiations.The resulting framework shows how consumers, managers, salespersons, andsociety as a whole can benefit at the same time by debiasing their negotiations.Chapter 10. The final chapter evaluates five explicit strategies for improvingjudgment (1) getting expertise, (2) debiasing, (3) taking an outside view, (4) usinglinear models, and (5) adjusting intuitive predictions. This chapter will get word you howto use the information in this book to create permanent improvements in your futuredecisions.