Online Content

1. Thompson, Ray with R. C. Shreckengost, "Using System Dynamics to Improve the Management of Working Capital in a Small Business"

Type:
Document
Date Created:
1983
Collection:
System Dynamic Society Records
Collecting Area:
University Archives
Collection ID:
ua435
Parent Record(s):
23d738ba88f8333bc39725f9cb5bd0b8, cf82ceba47eedd73f41b00918de16477, and b0aa2a699b54f0d19f6a9d93bdbcfa18
Thumbnail Path Ss:
/downloads/kw52js22q?file=thumbnail
System Modified Dtsi:
2020-01-02T18:37:29Z
Description:
Many firms use financial ratio analysis to monitor their control over the operating cycle and to serve as the basis for policy formation. Ratios are based on data produced through the accounting information system which is analyzed according to intuitively plausible concepts in order to make normative judgement about the financial health of the firm. A model is constructed to simulate the operating cycle of a business which generates financial ratios in a manner analogous to the accounting system. It is shown that noise and seasonality produce distortions in the ratio measures are spread throughout the system in a dynamic and complex fashion. Further experiments reveal that plausible control policies based upon financial ratios may make performance worse rather than better. System Dynamics appears to be a useful approach both to redesigning financial ratio measures and testing policies which could enhance out ability to manage such systems.