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FinanceTheory / principleReal options theoryWhen and how should real options theory be applied?Use real options reasoning when outcomes are uncertain, management can respond to future information, the response has material economic value and the initial decision affects whether that flexibility remains available. It is especially useful when a conventional discounted cash flow or net present value calculation treats management as passive and therefore misses the value of staged commitment.IntermediateStrategicFigures
FinanceFramework / modelActivity-based costingWhen and how should activity-based costing be applied?ABC is particularly useful when overhead is substantial and products or customers vary widely in complexity and handling requirements. By tracing indirect expenditure to the activities that generate it, the method makes those costs more directly attributable. This greater precision can expose opportunities to improve process effectiveness and efficiency while clarifying the true cost of an offer.AccessibleOperationalFigures