UNDERSTANDING DECISION TABLES. BY SRISHTI GUPTA
- 1. Understanding Decision Tables A decision table is a powerful tool used to model and analyze complex decision-making processes. It provides a structured and systematic way to map out all possible scenarios, inputs, and corresponding actions or outputs. This visual representation helps businesses, analysts, and decision-makers clearly identify the logic underlying their decisions, leading to more informed and consistent choices. by Srishti Gupta (21001433058) DD BBA-MBA (6th Semester) System Analysis and Design
- 2. Anatomy of a Decision Table Conditions The upper-most rows of a decision table represent the different factors or conditions that influence the decision-making process. These could be variables, constraints, or any other relevant input that needs to be considered. Actions The bottom rows of the decision table define the possible actions or outputs that can be taken based on the combination of conditions. These actions are the resulting decisions or outcomes of the process. Rule Sets Each rule set represents a unique scenario, with specific conditions leading to a corresponding action or outcome.
- 3. Decision Tables in Action: Loan Approval Example 1 Applicant Information The first step in using a decision table for loan approval is to gather all relevant information about the applicant, such as their credit score, income, employment status, and existing debt. 2 Condition Evaluation The decision table is then used to evaluate the applicant's information against the predefined conditions, such as credit score thresholds, debt-to-income ratios, and employment history requirements. 3 Action Determination Based on the combination of conditions met, the decision table will then determine the appropriate action, such as approving the loan, offering a modified loan amount, or denying the application.
- 4. References The information in this presentation is drawn from various online sources that provide in-depth guidance on decision tables and their applications. These include industry blogs, academic papers, and expert tutorials.
Editor's Notes
- #4: Credit Score An applicant's credit score is one of the most crucial factors in the loan approval process. Lenders rely heavily on this three-digit number, which reflects the borrower's creditworthiness and repayment history. Generally, the higher the credit score, the more likely the loan will be approved. Applicants with excellent credit (scores above 760) are typically offered the best terms and interest rates, while those with poor credit (below 620) may face difficulties getting approved or receive less favorable conditions. Income and Debt-to-Income Ratio Lenders also closely examine an applicant's income and debt-to-income (DTI) ratio to assess their ability to repay the loan. The DTI ratio compares the applicant's monthly debt payments to their monthly gross income, and it is a strong indicator of financial stability. Applicants with a lower DTI (generally below 43%) are more likely to be approved, as they have a greater capacity to allocate funds towards the new loan payment. Employment and Stability Lenders also consider an applicant's employment history and job stability when evaluating a loan application. Applicants with a consistent, long-term employment record, particularly in the same industry or field, are viewed more favorably than those with frequent job changes or unstable income sources. Lenders want to ensure that the borrower has a reliable and sustainable source of income to make their loan payments. Collateral and Loan-to-Value Ratio For certain loan types, such as mortgages or auto loans, the value of the collateral and the loan-to-value (LTV) ratio are important factors in the approval process. The LTV ratio compares the loan amount to the value of the asset being financed, and it helps lenders assess the risk of the loan. Applicants with a lower LTV (generally below 80%) are more likely to be approved, as the lender has a higher level of security in the event of default.