Portland State University. Systems Science Ph. D. Program
Date of Publication
Doctor of Philosophy (Ph.D.) in Systems Science
Business community, Corporations -- Finance -- Mathematical models, Management -- Mathematical models
xviii, 262 leaves: ill. 28 cm.
The dissertation deals with the allocation of resources, among profit producing elements within a company, to achieve satisfactory results over a planning horizon. The company is viewed as a confederation of profit making elements called Strategic Business Units (SBU) which are independent of each other and held together by a central authority. The dissertation uses a computerized simulation model of the deterministic type in a timesharing mode. The model is deterministic with some limited probabilistic The model is deterministic with some limited probabilistic effects. It is used to develop projected balance sheets and profit and loss statements for each period in a predetermined planning horizon and to evaluate the success of a set of alternative futures of the SBU. The set of SBU alternatives to be evaluated as the "company" may be arbitrarily chosen by the operator or chosen through the use of a near-optimal, integer programming algorithm for a variety of measurement criteria and subject to various restraints on the balance sheet. The research uses data generated by the long-range planning process at an intermediate sized, multinational corporation listed on the New York Stock Exchange. The data consist of assets, liabilities, and profit and loss statement items for each period in a planning horizon and for each of three alternatives of each SBU in the study. In addition, a beginning corporate balance sheet is required as are planned corporate expense items and the specification of operating restrictions. Research into the effect of several strategic policies, including dividend rate and debt to equity ratio, on the future prospects of the company in accordance with the optimal value of five different measurement criteria, is reported. The five measurement criteria are present value of shareholder equity, growth in earnings per share, growth in total assets, total assets and growth in sales. The appendix material contains listings of computer programs used in the model (written in the Basic computer language), the research data used, numerous computer printouts, and technical discussions on the model. Several tentative conclusions are listed, many areas for further research are suggested, and strengths and constraints of the model are discussed. It is concluded that the techniques developed have good potential for increasing cash generation and the efficiency of the investment process in a company; the dividend rate has a significant effect on how fast a company can grow; and the model is flexible and can be used for a number of investigative purposes to support company decision-makers. An interesting area for further research is the tentative conclusion that return on assets, when used as an optimization criterion, produces a significantly different set of SBU alternatives from the one which results from using the other measurement criteria.
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Pope, Donald Leland, "Strategies and the management of a portfolio of business units" (1974). Dissertations and Theses. Paper 566.