Introduction to MIS. Chapter 9 Business Decisions Jerry Post. Technology Toolbox: Forecasting a Trend Technology Toolbox: PivotTable Cases: Financial Services. Outline. How do businesses make decisions? How do you make a good decision? Why do people make bad decisions?
Technology Toolbox: Forecasting a Trend
Technology Toolbox: PivotTable
Cases: Financial Services
Analysis and Output
Sales and Operations
Determining Production Levels
in Perfect Competition
Economic, financial, and accounting models are useful for examining and comparing businesses.
Company A’s share price increased by 2% per month.
Company B’s share price was flat for 5 months and then increased by 3% per month.
Which company would you invest in?
Oldsmobile Cutlass Ciera
Why is it bad that all four divisions produced the same car?
How is it possible that designers would produce the same car?
All photos from Wikipedia
See Fortune August 22, 1983 cover for photos new.
WSJ 2008 Version
Barabba, Vincent and Gerald Zaltman, Hearing the Voice of the Market, Harvard Business Press: Cambridge, MA, 1991
Sales and Revenue 1994
data to analyze
Quarterly sales and GDP for 16 years.
Sales = b0 + b1 Time + b2 GDP
Estimate model coefficients with regression.
Forecast GDP for each quarter.
Compute Sales prediction.
Balance Sheet for 2003
Cash 33,562 Accounts Payable 32,872
Receivables 87,341 Notes Payable 54,327
Inventories 15,983 Accruals 11,764
Total Current Assets 136,886 Total Current Liabilities 98,963
Common Stock 57,864
Net Fixed Assets 45,673 Ret. Earnings 10,750
Total Assets 182,559 Liabs. + Equity 182,559
Income Statement for 2003
Sales $97,655 tax rate 40%
Operating Costs 76,530 dividends 60%
Earnings before interest & tax 21,125 shares out. 9763
Earnings before tax 17,072
Net Income 10,243
Add. to Retained Earnings 4,097
Earnings per share $0.42
Balance Sheet projected 2004
Income Statement projected 2004
Acts Receivable 96,075
Accts Payable $36,159
Notes Payabale 54,327
Earn. before int. & tax
Total Cur. Liabs. 103,427
Total Cur. Assets 150,576
Earn. before tax
Common Stock 57,864
Ret. Earnings 14,915
Net Fixed Assets 45,673
Total Assets $196,248
Liabs + Equity 191,188
Add. Funds Need 5,060
Add. to Ret. Earnings
Bond int. rate 5%
Earnings per share
Added interest 253
Tax rate 45%
Dividend rate 60%
Shares outstanding 9763
Forecast sales and costs.
Sales increase 10%
Operations cost increase 10%
Forecast cash, accts receivable, accts payable, accruals.
Add gain in retained earnings.
Compute funds needed and interest cost.
Results in a CIRCular calculation.
Add new interest to income statement.
per capita income
What items do customers buy together?
Ifincome > 20,000
or expenses < 3000
and good credit history
or . . .
Then 10% chance of default
Welcome to the Loan Evaluation System.
What is the purpose of the loan? car
How much money will be loaned? 15,000
For how many years? 5
The current interest rate is 7%.
The payment will be $297.02 per month.
What is the annual income? 24,000
What is the total monthly payments of other loans? Why?
Because the payment is more than 10% of the monthly income.
What is the total monthly payments of other loans? 50.00
The loan should be approved, there is only a 2% chance of default.
total < 30%
by ES shell
Maintained by expert system shell
seen by user
(for (k 0 (+ 1 k) )
exit when ( ?> k cluster-size) do
(for (j 0 (+ 1 j ))
exit when (= j k) do
(connect unit cluster k output o -A
to unit cluster j input i - A ))
. . . )
Custom program in LISP
Some of the connections
Sensory Input Cells
Several teams passed the second DARPA challenge to create autonomous vehicles. Although Stanford won the challenge, Team TerraMax had the most impressive entry.
Copy the red, file the blue, delete the yellow mark.
Now, change the commas slightly.
Copy the red file, the blue delete, the yellow mark.Language Recognition
I saw the Grand Canyon flying to New York.
The panda enters a bar, eats, shoots, and leaves.
http://www.youtube.com/watch?v=12rNbGf2Wwo Practice match 4 min.
February 14-16, 2011: Watson beat two top humans in Jeopardy.
Natural language parsing and statistical searching.
Multiple blade servers and 15 terabytes of RAM!
Moving farther from the reference point
increases the chance that the temperature is
considered to be different (cold or hot).
Decision Support System
What is the monthly income?
What are the total monthly payments on other loans? 450
How long have they had the current job? 5 years
. . .
Should grant the loan since there is only a 5% chance of default.
loan 1 data: paid
loan 2 data: 5 late
loan 3 data: lost
loan 4 data: 1 late
Lend in all but worst cases
Monitor for late and missing payments.
Neural Network Weights
Name Loan #Late Amount
Brown 25,000 5 1,250
Jones 62,000 1 135
Smith 83,000 3 2,435
Evaluate new data,
Rolling Thunder query for total sales by year and month
Use Format(OrderDate, “yyyy-mm”)
In Excel: Data/Import/New Database Query
Create a line chart, right-click and add trend line
In the worksheet, add a forecast for six months
1. Why is a linear forecast usually safer than nonlinear?
2. Why do you need to create a new column with month numbers for regression instead of using the formatted year-month column?
3. What happens to the trend line r-squared value on the chart when you add the new forecast rows to the chart?
1. How is the cube browser better than writing queries?
2. How would you display quarterly instead of monthly data?
3. How many dimensions can you reasonably include in the cube? How would you handle additional dimensions?