Capsim simulation analysis report

Structured Approach

to the

Simulation Analysis Report

BA 411

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Created by Nancy L. McClure for classroom use only.

Do not distribute, photocopy, or reprint without permission.

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Simulation Analysis Report

Grading Criteria for SAR at the top of the ANGEL website:

Due Date for SAR is 2/24/16 at 9:00 a.m.

Submit to Turnitin (Turnitin instructions provided by your TA)

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How to Prepare your

Simulation Analysis Report

Materials/References Required:

Capsim Courier (all 7 rounds) and Related Financial Reports

“Seven Deadly Sins of Analytical Writing” Article

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How to Prepare your

Simulation Analysis Report

Key Questions to Consider:

Who is my Audience?

What is the purpose of this communication?

What are the key points I need to make?

What is the best way to communicate this information?

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How to Prepare your

Simulation Analysis Report

Analysis – The “Big” Picture:

Should focus on answering:

Why you made key decisions

Impact of decisions on operations and profitability

Consider your strategy and the competitive environment when analyzing these decisions

Provide quantitative analysis (including charts and graphs you construct) to:

support these decisions, and

explain their impact on your company’s profitability

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How to Prepare your

Simulation Analysis Report

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Key Functional Areas

How to Prepare your

Simulation Analysis Report

Analysis – Application to Your Capsim Company:

Consider your Strategy, and its impact on the following key areas:

R&D

Marketing

Production

Finance

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Linking Strategy and Operations and ROI

For Each Functional Area, consider expected ROI for potential investments:

Marketing

ROI for investments in Awareness and Accessibility

R&D

ROI for investments to update current products or introduce new products

Production

ROI for investments in capacity

Finance

ROI for debt (leverage)

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How to Prepare your

Simulation Analysis Report

R&D Analysis:

Some Key Questions to consider when analyzing your R&D decisions:

Why did you change (or not change) your products placement on the perceptual map, including the timing of the adjustments?

How, specifically, did this impact your company’s profitability?

How did your competitors’ actions impact your decisions and profitability?

What will you do differently in the future to improve your R&D outcomes?

How could you quantitatively demonstrate these points in charts/ graphs?

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How to Prepare your

Simulation Analysis Report

Marketing Analysis:

Some Key Questions to consider when analyzing your Marketing decisions:

How, specifically, did you invest in your products’ awareness and accessibility?

How did the timing and amount of your investments impact your company’s profitability?

What impact did your competitive environment have on the amount, timing, and profitability of your investments?

What will you do differently in the future to improve your Marketing outcomes?

How could you quantitatively demonstrate these points in charts/ graphs?

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How to Prepare your

Simulation Analysis Report

Production Analysis:

Some Key Questions to consider when analyzing your Production decisions:

How did you link your sales forecasts to your production schedule? How did you manage any over/underproduction issues?

How did you allocate your resources for capacity and production (e.g., purchase/sell capacity by product, overtime, automation, etc.)? What was the impact on your profitability of these decisions?

How did you contribution margins impact your production decisions?

How did you use TQM and Human Resources to improve your profitability?

How did your competitors’ actions impact your decisions and profitability?

What will you do differently in the future to improve your Production outcomes?

How could you quantitatively demonstrate these points in charts/ graphs?

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How to Prepare your

Simulation Analysis Report

Finance Analysis:

Some Key Questions to consider when analyzing your Finance decisions:

Why did you choose your current capital structure (i.e., proportion of debt to equity)? How has this choice impacted your profitability?

How did you utilize (e.g., earn a return) and manage (e.g., generate funds to repay) your debt?

How did you manage your operating cash flows as they related to your finance decisions?

How did your competitors’ actions impact your decisions and profitability?

What will you do differently in the future to improve your Finance outcomes?

How could you quantitatively demonstrate these points in charts/ graphs?

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How to Prepare your

Simulation Analysis Report

Additional Considerations:

You should perform your basic ratio/quantitative analysis and then choose the key issues you will address in your paper

You can identify the key issues by asking yourself what are they three most important points you need to communicate to your audience

Then, you can provide the background analysis for the key issues and link them to your:

strategy,

competitive environment,

profitability, and

planned improvements for the future

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Financial Analysis:

Brief Tutorial

The following slides provide a brief tutorial on financial analysis of a business.

You may use these slides as a starting point for the analysis of your Capsim company.

You may also use the Excel spreadsheet provided in the lecture notes folder on ANGEL to build your company’s financial analysis (e.g., to build ratios, charts, graphs, etc.).

Next week, in lecture, we will dig deeper into the use of ratios and other tools to analyze your business.

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Financial Analysis - Brief Tutorial

A “Road Map” for Performance Measurement

Financial Analysis Measures Company’s:

Ability to pay debt as it comes due

Effectiveness and efficiency of operations

Profitability

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Financial Analysis: Overview

Financial Information useful when company compared to:

Itself over time (longitudinal analysis),

Industry measures of performance (horizontal analysis, benchmarking), and

Economy-wide measures of performance.

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Financial Analysis: Overview

Performance Analysis – Two Approaches:

Common-Size Analysis

Ratio Analysis

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Common Size Analysis:

Overview

Compares:

firms of differing sizes, or

year-to-year results for a single firm

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Common Size Analysis:

Computation

Common Size:

Built by dividing each number on a statement by the largest number on that statement

Balance Sheet - Items are stated as a percentage of Total Assets

Income Statement - Items are stated as a percentage of Total Revenues

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Balance Sheet - Items are stated

as a percentage of Total Assets

Income Statement - Items are stated as a percentage of Total Revenues

Sample Common Size Balance Sheet and Income Statement

Source: Investopedia.com

Ratio Analysis:

Overview

Ratio Analysis:

Converts financial data to percentages

Allows comparison of:

Same firm over time – trends

Different firms at the same time – benchmarks

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Ratio Analysis:

Categories

Major Categories:

Liquidity – Cash to pay debt on time

Activity – Efficiency of company’s operations

Leverage – Mix of equity and debt

Profitability – Earnings achieved

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Ratio Analysis:

Liquidity

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Do our Assets Convert Easily to Cash?

Able to pay

short-term

debt?

Ratio Analysis:

Activity

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Do We Use Assets Efficiently?

Effective at

Collecting Debt?

Times Inventory Sold

Rate Pay Suppliers

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Ratio Analysis:

Leverage

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Can we Pay our Long-Term Obligations?

How many times can we pay interest?

What % assets financed

by debt?

Ratio Analysis:

Profitability

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Have we covered our costs

and earned sufficient returns?

% of Inc. available to pay Op. Costs

Inc. Earned per Dollar of Assets

Income per Dollar of Equity

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Financial Statement Analysis:

Caution

Remember when using Ratio Analysis:

Financial ratios merely compare one value to another

Deemphasize relative size of firms

No absolute answers

Can help you ask the right questions

GIGO Rule Applies - Garbage In, Garbage Out

No single “correct” way to compute ratios

Must understand structure and interpretation of ratios

Watch out for accounting distortions

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