Interactive Tools Used in Applying Financial Concepts Developments in Business Simulation and Experiential Learning, Volume 26, 1999 INTERACTIVE TOOLS USED IN APPLYING FINANCIAL CONCEPTS David A. Jordan, Geneva College ABSTRACT This paper addresses the need and use of interactive tools in teaching financial concepts. These tools were developed by the author for use in his classes. He is not a financial expert, but a practitioner who understands the need for such tools as an aid to student understanding and application. He has developed these tools as a result of his own experience as an engineer in a business curriculum. NEED FOR INTERACTIVE TOOLS Not all students taking a class in financial management have an extensive background in accounting. Engineers and business students focusing on non-financial areas of business don’t always appreciate the need for these courses. They require application of this material in order to be motivated to learn it. Tools that focus on enhancing decision- making promote transference as a result of learning these concepts. Understanding the relationships between variables stimulates learning. Skills-based, hands-on exercises provide these students with dynamic experiential opportunities. INTERACTIVE TOOLS This paper presents two tools that have been developed by the author as aids to understanding financial concepts. They are presented below. Integrated Financial Statement Tool This computer-aided exercise tool provides a vehicle for demonstrating the relationships between several entries on a set of interrelated financial statements. The financial statements include an income statement, a consolidated balance sheet and two forms of cash flow statements. These statements are displayed on a single Excel worksheet that is programmed using Visual Basic macros. Figure 1 shows a picture of this worksheet. The student may use this tool in two different applications. In the first application the computer highlights the items on the financial reports that relate to a specific process. Process selections include sales transactions, loan transactions and purchase transactions. Each process is color coded to highlight important issues that are addressed in exercises that accompany this tool. After selecting a transaction type the student focuses on specific changes in the statements related to that type of process. For example, when a sales transaction takes place, the question of which items are affected and how they are affected can be explored. The purpose of this feature is to help the student observe the inter-relationships between the items on the reports. In the second application of this tool the student can explore the effect of certain decision variables on various outcomes. The student enters different values for the decision variables and observes the corresponding changes on the financial statements. Decision variable choices include changing price and/or demand. Outcomes provided include revenue, cash and retained earnings. The purpose of this feature is to help the student observe the effect of changes in decision variables relative to important managerial outcomes Exercises have been developed that require the student to explore various concepts. For example, one exercise has the student compare 194 Developments in Business Simulation and Experiential Learning, Volume 26, 1999 changes in retained earnings and cash as a function of receivables. Students then develop graphs to display the relationships and discuss their observations. FIGURE 1 INTEGRATED FINANCIAL STATEMENTS Time-Value-of-Money Tool This tool models the time-value-of-money equations using an integrated set of windows to display the information. The student selects from a variety of techniques, i.e. lump sum, uniform series, gradient series; and then is prompted for the necessary inputs. A unique feature of this tool is the drawing of the cash flow diagram. This diagram is a visual depiction of all the input/output parameters and provides an excellent summary of the time-value-of-money process. Students can change any variable and observe the response in a “What If?” kind of environment. Students gain valuable insight into the dynamics of money changing value over time and begin to learn the effect of interest and time. Exercises have been developed that allow the students to compare changes in decision variables to a variety of outcomes. These hands-on exercises provide valuable experiential learning opportunities. 195 Table of Contents Volume 26, 1999 ABSEL's Historical Research Interests Back From the Future: An ABSEL Merlin Exercise for the Year 2005 The Contributions of ABSEL During the 1980's ABSEL's Contributions to Experiential Exercises in the 90's ABSEL's Contributions to Experiential learning/Experiential Exercises: The Decade of the 1970's Business Simulations - Algorithms and Model Enhancements: A 25 year Review A Study of the ETS General Field Test as an AACSB Assessment Tool and the Impact of Experiential Exercises and Simulation on Learning A Framework for Assessing the Competencies Reflected in Simulation Performance Developing A Learning Culture: Assessing Changes in Student Performance and Perception Financial Simulation Using Distributed Computing Technology Analyzing Managers' Judgements and Decisions with an Educational Business Simulation Understanding Your Business through Home-Made Simulator Development An Examination of a Reanalysis of the Impact of a Market Leader on Simulation Competitors' Strategies Applying Shocks to TE Simulations: A Demonstration Increasing Efficiency of Management Skill Assessment A Testbank for Measuring Total Enterprise Simulation Learning Developing Leadership Skills - Video Live! LEADSIMM: Collaborative Leadership Development for the Knowledge Society A Team Approach to Producing Multi-Media Laptop and Video Formatted Presentation Tinkertoys Revisited: Exploring Trust Based Relationships Overall Dominance in Total Enterprise Simulation Performance Success or Bankruptcy: The Relationship between Personal and Goal Orientation and Simulation Performance Assessing the Effects of Feedback: Muti-method and Muti-directions in Multi-pedagogical Courses The Missing Ingredients in Experiential Learning Purpose and Learning Benefits of Business Simulations: A Design and Development Perspective Building Capabilities for Change through Laboratory Simulations Modeling Innovation as a Process of Design in Educational Business Simulation The Need to Measurer variance in Experiential Learning and a New Statistic to do so Assessing Effectiveness of an Experiential Oriented Course Over Time Developing Participant Satisfaction Models of Experiential Exercises in Business Education Perceptions of Learning in TE Simulations Students' View on the Use of Business Gaming in Hong Kong Management Gaming's Lost Opportunity: Meditations about the Russian Experience and Prospects for the Future Unanticipated Enhancements in the Business Strategy and Policy Game when Running in Windows 95 Using a Business Game to Demonstrate Broad Business Concepts A New Model for Business Courses (Getting the Student Connected) Seeing the Forest and the Trees: Integrating Knowledge Using Large Scale Simulations in Capstone Business Strategy Classes Is It Here To Stay? A Roundtable Discussion of the Inter-Group Interaction Interactive Tools Used in Applying Financial Concepts Strengthening Essential Skills through a Finance Exercise: Calculation of Beta A Model of Currency Exchange Rates Understanding Currency Exchange Rates: A three-part Exercise Student Experiences in the World Intercollegiate Business Game Competition Student Experiences in the International-Collegiate Business Policy Game Competition Using Boards of Directors in Simulation Environments: Comments From Board Members Sharing Best Practices: Teaching Smarter, Not Harder Star Power: A Simulation for Understanding Power and Empowerment The Marketing Game: A Marketing Principles Simulation Alexander Islands: GSSM Tiny Business Simulator on the WWW Putting Strategy into Strategic Business Games Industry Analysis, Porter's Five Forces Model and Strategic Group Maps in the Business Strategy Game Simulation The Use of Concept Mapping to Improve Student Performance and Understanding of Strategic Management Concepts: A Comparison of Techniques Transformational thinking in the Organizational Behavior Course: The Use of Metaphor as an Assessment Tool Creation of a Virtual Learning Community for the Global Virtual Enterprise Project Inter Institutional use of Educational Resources: Joint Use of Management Simulation Games Business Insights: Theory and Practice with the Aid of a Business Simulation Progress: An Experiential Exercise in Development Marketing The ABC's of teaching the Theory of Constraints to Undergraduate Business Students Demonstrating Principles of Organizational Purchasing Behavior through an Experiential Exercise The Virtual Manager: A Different Simulation for Managing Complexity When the Rules are changing and Chaos Breeds Innovation: Recapturing the Value of Constructive Thinking and Play in Simulation Training The Pitfalls, and Potential, of Actual Events as Problem Drivers Using Business Games to teach Environmental Awareness and Green Management: The International Experience with the ENSIM Game A Review of my ABSEL-Related Work Simulation of Government: A Workshop Using GEO Creating Internet-Based Games Using Perl and JavaScript Who's on First? Exploring the Concepts of Problem-Based Learning, Experiential Learning, and Lifelong Learning Students Learn Customer Service and Selling while Conducting Research So You Want to Run an NFL Football Team–An Honors Interdisciplinary Project Supervised Internship: The Employer's Perspective Using Computer Assisted Simulation to Teach International Business Strategy: A Case of the Multinational Management Game (MMG) Multi-Cultural Experiential Learning: A Computer Simulation in China An Appreciative Stance on Diversity as We Move into the 21st Century: A Timeline Exercise to Identify Key Experiences in Good Work Relationships between Black and White Peers A Day in the Life of an Interactive, Real Time, and Internet Delivered Course: A Demonstration Comparing Internet Search Engines: An Experiential Learning Exercise Total Enterprise Simulations and the Internet: Assessing Student Perceptions and Preferences Teaching Accounting Information Systems in a Practicum Format Providing Experiential Learning in Accounting through a Field Study Payroll Project A Spreadsheet Based Business Simulation Game Computer-Behavioral Simulations Training for Project Managers Simulation Scenarios - Rationale and Illustration