Dinamic of Financial System : A System Dynamic Approach

Free PPT Templates Syndicate Assignment

Syndicate 4, Members :
1. Yombi Wikso Gautama 29118304
2. Saeful Aziz 29118389
MM6061 Pemodelan untuk Bisnis
3. Christine Anggarani 29118384 Dr. Manahan Parlindungan Saragih Siallagan
4. Merita Setiowati 29118375 In House PT Berau Coal
Agenda Structure
01 Introduction
Explanation

02 Conceptual Model
Explanation

03 Simulation & Result

Explanation

04 Conclusions
Explanation
INTRODUCTION
 BACKGROUND
❖ There are several ratios which define
the financial health of an
organization but the importance of
Net cash flow, Gross income, Net
income, Pending bills, Receivable
bills, Debt, and Book value can never
be undermined as they give the
exact picture of the financial
condition.
❖ There are many things that make
financial system design issues very
complicated, there are fundamental
and radical changes in the financial
industry, such as deregulation and
technological progress.
❖ Deregulation, in various parts of the
world, has made the provision of
financial services more flexible and can
support competition between finance
and technological advances that have
increased profitability and facilitated
the process, the process of tracking
various activities faster and cheaper.
❖ The paper was made as a system
approach to financial dynamics within
manufacturing company.
RESEARCH QUESTION

How to improve company efficiency?

 They hope that by answering this question, they will have an

ideal financial system and modeling concept to increase
production by up to 40%.

 Remembering when they have the ideal concept and modeling, it

can be used as a supporting tool in the organization's expansion
plans.
 LITERATURE REVIEW

- The financial dynamics modeled and simulated in this paper revolve around the
variable taxable income, net income, net cash flow, debt, book value that has
influence on business performance.

- However, the principles of Cybernetics proposed by Wiener (1948) and Ashby

(1957) and System Dynamics (SD) The methodology proposed by Forrester (1961),
has been applied by various researchers to different problem situations in
developing causal circle diagrams, flow diagrams, and governing equations. SD
model developed to analyze the existence of change factors such as the
development of new technology.
CONCEPTUAL
MODEL
 VARIABLES

No Variable Name Variable type Equation/Value

1 Actual Quality Exogenous 0.6 (Dmnl)

2 Available Capacity Endogenous IF THEN ELSE(Time >= building time,Production capacity,0)

(Unit/Year)

3 Billing Time Exogenous 0.04 (year)

4 Billings Endogenous Pending Bills/billing time

($/Year)

5 Book Value Endogenous INTEG(new investment-tax depreciation,0)

(US $)

6 Building Time Exogenous 1 (Year)

 VARIABLES

7 Capacity Exogenous 1000 (Unit)

8 Debt Endogenous INTEG(loans-repayment rate,0)

(US $)

9 Debt Repayment time Exogenous 3 (Year)

10 Demand Endogenous market share*total demand*quality

(Unit)

11 Desired production capacity Endogenous capacity*rate of increase

(Unit/year)

12 Discount Rate Exogenous 0.12

(1/year)

13 Expected distributors orders Exogenous 8000 (Unit)

 VARIABLES

14 Expected production rate Exogenous 3000 (unit/year)

15 Final Time Exogenous 5 (year)

16 Gross income Endogenous Pending Bills/billing time

(US $/Year)

17 Initial Time Exogenous 0 (Year)

18 Input rate Endogenous ordering qty/transportation time

(items/Week)

19 Interest payments Endogenous Debt * interest rate

(US $/Year)

20 Interest rate Exogenous 0.12 (1/year)

 VARIABLES

21 Inventory adj time Exogenous 0.04 (Year)

22 Inventory discrepancy Endogenous INTEG (production rate,0)

(Unit).

23 Loan financing fraction Exogenous 0.6 (Dmnl)

24 Loans Endogenous new investment * loan financing fraction

(US $/Year).

25 Loss rate Exogenous 0.66 (1/year)

26 Losses Endogenous Receivable Bills * loss rate

(US $ / year)

27 Market Share Exogenous 6000 (Unit)

 VARIABLES

28 Net cash flow Endogenous receivable cash + loans - new investment -variable costs – interest
payments - repayment rate - taxes
(US $/Year).

29 Net Income Endogenous taxable income - taxes

(US $/Year).

30 New Investmen Endogenous IF THEN ELSE(Time>=building time,0,required investment/ building

time)
(US $/Year)

31 Npv cash flow Endogenous NPV(net cash flow,discount rate,0,1)

(US $)

32 Npv income Endogenous NPV(net income,discount rate,0,1)

(US $).

33 Ordering Qty Endogenous demand*Unit time

(Unit)
 VARIABLES

34 Payment delay Exogenous 0.09 (Year)

35 Pending bills Endogenous INTEG (productionrevenue-billings, productionrevenue * billing time)

(US $)

36 Production Endogenous IF THEN ELSE(Time >= building time,Production capacity,0)

(Unit/Year)

37 Production Capacity Endogenous INTEG (production rate,0)

(Unit)

38 Production Rate Endogenous MAX( MIN( MIN(Raw materials/production time, desired production
capacity), expected distributors orders-expected production
rate+Inventory discrepancy /Inventory adj time), 0)
(Unit/Year)

39 Production Time Exogenous 0.04 (Week)

 VARIABLES

40 Production Revenue Endogenous production * selling price

(US $ / Year)

41 Quality Endogenous actual quality*quality perspective index

(Dmnl)

42 Quality Perpective Exogenous 0.06 (Dmnl)

index

43 Rate of Increase Exogenous 1.4 (Dmnl)

44 Raw Materials Endogenous INTEG (input rate-production rate, 100)

(Unit)

45 Receivable Bills Endogenous INTEG(billings-receivable cash-losses,billings /(1/payment

delay + loss rate))
(US $)
 VARIABLES

46 Receivable cash Endogenous Receivable Bills/payment delay

(US$/ year)

47 Repayment rate Endogenous Debt/debt repayment time

(US $ / Year )

48 Required Investment Exogenous 2000 (US $)

49 Saveper Exogenous 0.015625 (Year)

50 Selling Price Exogenous 1 (US $/ Unit)

51 Tax Depreciation Endogenous Book Value/tax depreciation period

(US $/ Year)

52 Tax Depreciation Period Exogenous 10 (Year)

 VARIABLES

53 Tax Rate Exogenous 0.4 (Dmnl)

54 Taxable Income Endogenous Gross income - variable costs - losses - interest payments - tax
depreciation
(US $ / Year )

55 Taxes Endogenous taxable income * tax rate

(US $ / Year)

56 Time Step Exogenous 0.015625 (Year)

57 Total Demand Endogenous RANDOM UNIFORM(800, 1000, 2)

(Unit/ week)

58 Transportation time Exogenous 0.08 (Year)

59 Unit Time Exogenous 0.08 (Year)

 VARIABLES

60 Variable Cost Endogenous production * variable production cost

(US $/Year)

61 variable production cost Exogenous 0.6 (US $/Unit)

STOCK &
FLOW
DIAGRAM
(SFD)
SIMULATION &
RESULTS
 SIMULATION

ORIGINAL - Production Capacity RE SIMULATION – Production Capacity

 SIMULATION

ORIGINAL - Pending Bills RESIMULATIONS - Pending Bills

 SIMULATION

ORIGINAL - Receivable Bills RESIMULATIONS – Receivable Bills

 SIMULATION

ORIGINAL - Net Cash Flow RESIMULATION - Net Cash Flow

 SIMULATION

ORIGINAL - Gross Income RESIMULATION – Gross Income

 SIMULATION

ORIGINAL - Net Income RESIMULATION – Net Income

 SIMULATION

ORIGINAL - Debt RESIMULATION - Debt

 SIMULATION

ORIGINAL - Book Value RESIMULATION – Book Value

 EXPLANATION OF GRAPHIC RESULT
❖ The simulations of product capacity have been carried
out to study the variations for a ten to forty percent
increase in production rate per year, which the
company has aimed for.
❖ In business, cash flow is considered to be the life-
blood because if the business is not able to obtain new
finance it will become insolvent. Hence, it is important
to predict (forecast) what is going to happen to cash
flow to make sure the business has enough to survive
❖ For Net Cash Flow that initially the increase in the
cash flow is negligibly small, however, after the fourth
year, there is a uniform growth in the Net cash flow for
the given increase in the production rate. From the
second to the fifth year when the production rate is
increased from 10 to 40% the Net cash flow increase
would be about 35%
❖ For the first five years of operation, the
increase in production capacity does not vary
the Debt or Book value of the company. After
the first year of operation the debt will be
uniformly reduced in a non-linear pattern and
reduces to about 27% by the fifth year of
operation.
❖ For Gross Income from the first year of
operations the Gross income increases
substantially (Figure 6) and follows a linear
pattern of growth. From the second to the fifth
year of operation, for an increase of
production rate from 10 to 40% an increase of
about 40% in the Gross income can be
assured.
CONCLUSION
 CONCLUSION & SUGGESTION
❖ This Simulation has explored if a company plans
for the increase in production the corresponding
dynamics in financial scenario has been
simulated. (Net cash flow, Gross income, Net
income, Pending bills, Receivable bills, Debt,
and Book value )
❖ The model can be used by the financial experts
as a decision support tool in arriving at
conclusions in connection to the expansion
plans of the organization
❖ However, the dynamics phenomena
shows that the percentage cannot be
generalized completely to a manufacturing
company as there could be extraneous
factors which might cause a confounded
relationship
❖ The suggestion is: Future researchers
can also think of simulating the various
ratios for a given increase in production.
THANK YOU