Financial Analysis

an exploration of how management decisions impact financial results

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FINANCIAL ANALYSIS places participants in the role of financial consultants creating an annual plan. In doing this they will refresh and test their knowledge of final accounts (Profit & Loss and Balance Sheet), key business measures (Profitability, Liquidity, Financial Strength and Business Type).

Most importantly this business simulation explores how management actions impact financial results and in half day provides an immersive finance for non-financial management activity.

The simulation is available off-the-shelf in two versions - one using UK financial terminology and one using US financial terminology. However, the simulation is designed so that the terminology can be tailored to match your organisation.

More Information

Summary
Key Learning
Documentation
Download
Ways of Using

For all levels
Duration - 4 hours
Type - Direct Use
Off-the-shelf

Main Topics
Finance

SUMMARY

KEY LEARNING: As detailed below this covers:

  • FINANCIAL REPORTING
  • PROFIT & LOSS/INCOME STATEMENT
  • BALANCE SHEET
  • KEY FINANCIAL MEASURES
  • PROFITABILITY & LIQUIDITY
  • INFLUENCING FINANCIAL RESULTS

DURATION: About four hours. This duration allows the simulation to fit into most course time-tables and, it can be also used as a stand-alone event or at a business conference.

TARGET AUDIENCE: The simulations are designed to be used by all levels of management and functional specialists.

METHOD: After a short briefing the training group is divided into several teams of three to five participants. These teams consider the problem facing them and then make a series of plans that are fed, by the team, into their own microcomputer that simulates their effect. The results are printed for the team to analyse and discuss before modifying their plan. This cycle should be repeated for six to ten times. At the end of the simulation phase the teams reunite to discuss and compare results.

The planning models are designed and calibrated so there is no right answer. This ensures the maximum of discussion and argument, both during planning and during the review. Further, these simulations serve to complement traditional lectures. By using the computer to do the calculations, this ensures that participants make effective use of practice time.

The simulations may be used with any number of teams.

AVAILABILITY: This simulations is available off-the-shelf and a comprehensive Trainer's Pack is provided allowing trainers with little or no experience with simulations to run the simulations.

TAILORABILITY: Besides the standard versions, Financial Analysis can be tailored for a nominal fee to match your company's, financial terminology, reporting structures and, even, the managerial and industrial issues facing your business.


KEY LEARNING

FINANCIAL REPORTING

The simulation explores how managerial actions influence financial performance. It involves the participants deciding which of a range of business options should be implemented. For example, participants will need to decide whether to increase prices, reduce stock availability or launch a new product. Each option has a different effect on the Profit and Loss Account and Balance Sheet and so influences the key financial ratios in different ways.

PROFIT & LOSS ACCOUNT/INCOME STATEMENT

The simulation presents a standard Profit & Loss Account and so builds participants awareness of the structure of this and, importantly, how managerial actions influence each part of the Profit & Loss Account.

BALANCE SHEET

As for the Profit & Loss Account, participants build their knowledge of the make-up of the Balance Sheet and how managerial actions influence it. Additionally, participants gain an understanding of how funds are used (Assets) and who supplies them (Equity and Liabilities).

KEY FINANCIAL MEASURES

Besides providing a report that suggests a list of measures to highlight financial performance, the simulation provides three other reports that investigate performance from the viewpoints of Profitability, Financial Strength and Business Type.

PROFITABILITY & LIQUIDITY

The standard version of the simulation starts from the situation where the company is insufficiently profitable but reasonably liquid. So, initially teams must chose options that increase profitability. But, a plan that just focuses on increasing profitability, does so at the expense of liquidity. So, next, teams must incorporate into the plan options that increase liquidity. Until, eventually, teams produce the best plan. Then, during the review, they must justify their best plan to the other teams. (The simulation is especially calibrated so that, usually, each team's best plan is different.)

INFLUENCING FINANCIAL RESULTS

The simulation focuses on how managerial actions influence results. The standard simulation involves a list of twenty-seven different options each of which influence the Profit & Loss Account and Balance Sheet in a different way and to a different extent. As part of the process, participants must initially investigate these separately and identify their financial strengths and weaknesses. But, as described above, a selection of these must be combined (so that the weaknesses of one option are more than compensated for by the strengths of the others).


DOCUMENTATION

Documentation is provided separately using UK and US financial terms in MS Word format and comprises:

Participants' Manual that provides, for the participants. a description of the simulation, a description of their task and how to use the software.

The Financial Options describes the possible options that have been identified by management to possibly improve business performance. These were chosen to illustrate different interactions between the Profit & Loss Account/Income Statement and Balance Sheet and how these effect Profitability, Liquidity etc. (Our design approach means that it is easy to provide a customised list of managerial options that reflect the issues facing your company.)

Definitions of Financial Terms provides a list of the financial terms used by the simulation and that may be encountered when evaluating finance. Although the simulator allows participants to access definitions while the simulation it is being run, this handout is provided to act as a resource during and after the simulation. (Our design approach means that it is very easy to change these terms to reflect those your company/industry uses.)

Financial Measures of business performance provide a short review and explanation of the financial measures of business performance. If the topics covered in this handout are not familiar to the participants, you may wish to provide this as prior reading or as a post simulation handout.

Using the Simulator provides, for the trainer (and computer support staff), information about installing the simulation and the use of the software.

Running the Simulation provides, for the trainer, information about running the simulation.

Briefing is a MS Power Point briefing explaining the simulation to the participants. (You may find it useful if you review this before reading the briefs.)

Specimen Results are provided in Adobe PDF format and illustrate output from the simulation thus:

Specific Plan shows the reports that can be produced comparing a specific plan against the previous year's results. The specimen results shows a full set of the results for a single plan and covers the options in the plan, the Profit & Loss Account/Income Statement, Assets, Liabilities, Other Published Data and the information derived from these (Key Business Measures, Business Type Data, Profitability Measures and measures of Financial Strength). (Our design approach means that it is very easy to change these reports (detail, terminology etc.) to reflect your needs).

Plan Comparisons compares all the plans produced and allow the participants to see how their decisions have changed the results (improving some and worsening others). The specimen results show two reports - the Profit & Loss Account (Income Statement) and the Key Measures report. The example shows how a team might increase profits and profitability by growing the business and, at the same time, funding the growth ensuring the company remains liquid!

Other Reports show a report from Explore Options showing how one option will affect results and a report from the Show Influences suggesting what must be done to increase the Return on Capital employed. Explore Options allows an exploration of each managerial option separately. It also allows teams to reflect on the links between managerial actions and financial outcomes. Show Influences allows an exploration of the link between improving financial measures and what needs to be done.

  UK Terms US Terms
Participants' Manual Download size 51k bytes Download size 56k bytes
Financial Options Download size 28k bytes Download size 26k bytes
Financial Terms Download size 41k bytes Download size 44k bytes
Financial Measures Download size 44k bytes Download size 44k bytes
Using the Simulator
Running the Simulation Download 64k Bytes Download 64k Bytes
Briefing Download 32k Bytes Download 33k Bytes
Specific Plan Download size 11k bytes Download size 11k bytes
Plan Comparisons Download size 6k bytes Download size 6k bytes
Other Reports Download size 6k bytes Download size 6k bytes

SIMULATOR DOWNLOAD

This is provided to allow you to download an evaluation version of the simulation. 

The table below shows the files to download, their description and size. You should copy them to a folder, a USB Flash Drive or even to floppy discs! Run setup.exe. The program will then install.

If, instead of installing from the Web, you are installing from the CD-ROM version of this resource you can install directly by clicking setup.exe and opening the file.

Note: When downloading the setup.lst file you must right click and then select Save As. (If you left click the file will open - this is a feature of Windows XP, Vista and Windows 7.)

File Description Size
setup.exe Installation Program 137 Kbytes
Setup.lst Installation Data 5 Kbytes
Financ1.cab Simulator Files (1) 1,282 Kbytes
Financ2.cab Simulator Files (2) 816 Kbytes

WAYS OF USE

This business simulation can be used:


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2003 Jeremy J. S. B. Hall

Most recent update:01/05/12
Hall Marketing, Studio 11, Colman's Wharf, 45 Morris Road, London E14 6PA, ENGLAND
Phone +44 (0)20 7537 2982 E-mail
jeremyhall@simulations.co.uk