In this simulation participants manage a simulated firm which executes short and long term financial transactions related to time value of money, working capital management, capital structure, and capital budgeting. Funding is available through short and long term loans, bonds and stock. On the investment side, the firm can invest in short-term certificates of deposit of various denominations, in plant expansion, and/or in equipment replacement. Firms also must choose between two suppliers based on price, term conditions. They should also consider extending three different cash discounts for the three products they manufacture and sell. Furthermore, they have to forecast liquidity needs and net income after taxes.
This simulation, in addition to giving participants the opportunity to assess the relevance of decisions in the funding and investment activities of a company, allows them to apply time value of money concepts in operations (with the selection of suppliers) and sales (with cash discounts). Performance reports are comprised of financial statements and corresponding footnotes. The report also details errors in cash budgeting and in projecting income statements. Points to teams are assigned based on firm ROE and financial forecasting errors.
The simulation is suggested for Corporate Finance and Financial Management courses. It is also ideal for Bank Credit Officers as it permits them to experience financial management from their clients’ point of view.
Students can be grouped in teams of two to five members. Up to twenty teams can participate. The simulation can last up to twelve weeks with each week simulating three months of operations. Before the beginning of each simulation, the economic environment and the degree of competition in which the companies will conduct their operations can be modeled. The potential profitability and risk of the company can also be modeled.
A manual and weekly instructions for students are provided on this website before each round of decisions. After each round, reports and financial statements in Excel format are made available to students. The professor also receives a summary report. Decisions are implemented in a progressive manner. The number and complexity of the decisions increases as the simulation progresses. A tentative decision schedule is available. After a simulation round is processed, firm reports, including financial statements and footnotes, are made available to participants and professors. Another report includes a summary of performance variables and a ranking of the teams. Depending on the preference of the instructor and the nature of the course, an Excel template can be made available to aid the students in forecasting financial statements. Students can also receive technical support from ASDSIM Business Simulations.