ASDSIM - Web based Simulations for assured learning

FinanceSim - Corporate Finance Simulation

In this simulation participants manage a simulated firm executing short and long term financial transactions related to working capital management 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 and term conditions. They can consider extending cash discounts for each of the three products they manufacture and sell. Furthermore, they have to forecast liquidity needs and net income after taxes.

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.

Decision Schedule

Decisions and forecasts can be implemented gradually, increasing the number and complexity of the decisions as the simulation progresses, quarter after quarter. The following is a tentative decision schedule: The first decision usually encompasses projecting short-term funding needs. The second decision requires projecting earnings; the third one, deciding on whether to use trade credit or a loan. The fourth decision requires participant to decided extending cash discounts for prompt payment. Up to this round of decisions, production and marketing decisions have been automatic to allow students to concentrate on short-term funding decisions. Decisions have also been cumulative: once a decision is required or allowed in a certain quarter, it is required or allowed in the following quarters. The fifth decision is about setting production orders under uncertain sales conditions. The sixth one allows participants to consider replacing equipment with different costs and productivity. This requires decisions that will have long-term effects. Students are allowed to make any decision in the following quarters including pricing and setting promotional expenditures.

Performance Evaluation

Teams are assigned points depending on their forecasts accuracy and ROE. For the long-term decisions, like replacing assets, the program assigns points depending on NPV analysis conducted by the program.

Final Note

FINANCESIM has been developed by Fernando E. Arellano. He holds an MS degree in Finance and a Ph.D. in Economics from Colorado State University. He has also developed VALUATIONSIM - A Corporate Valuation simulation, MANECSIM - A Managerial Economics Simulation and BANKMAN - A Bank management Simulation, the latter, with the late Dr. Richard D. Johnson. Dr. Arellano has taught at Colorado State University while pursuing his doctoral degree (1990-1993), Instituto Tecnologico y de Estudios Superiores de Monterrey in Mexico (1993-1996), at Universidad Peruana de Ciencias Aplicadas and Centrum - Catholic University of Peru, both in Lima Peru (1997-2000), and at University of Dallas in Dallas (2001-2020). He is currently retired, but still teaches a Valuation course online as an adjunct professor for Southeastern Oklahoma State University.

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