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Dynamics of Financial System: A System Dynamics Approach

  • Girish K. Nair

    (International Hospitality Management Faculty, Stenden University, India)

  • Lewlyn Lester Raj Rodrigues

    (Department of Humanities & Social Sciences, Manipal Institute of Technology, Manipal University, India)

There are several ratios which define the financial health of an organization but the importance of Net cash flow, Gross income, Net income, Pending bills, Receivable bills, Debt, and Book value can never be undermined as they give the exact picture of the financial condition. While there are several approaches to study the dynamics of these variables, system dynamics based modelling and simulation is one of the modern techniques. The paper explores this method to simulate the before mentioned parameters during production capacity expansion in an electronic industry. Debt and Book value have shown a non-linear pattern of variation which is discussed. The model can be used by the financial experts as a decision support tool in arriving at conclusions in connection to the expansion plans of the organization.

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Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

Volume (Year): 3 (2013)
Issue (Month): 1 ()
Pages: 14-26

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Handle: RePEc:eco:journ1:2013-01-2
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