Profitability analysis schedule

Use portfolio analysis techniques to select and progress research and development projects. Research cannot be scheduled, but finances can be budgeted and milestones set. Development, on the other hand, should be done well and as rapidly as possible to maximize profit. 

For consequence analysis, we have developed a dynamic simulation model of the refinery SC, called Integrated Refinery In-Silico (IRIS) (Pitty et al., 2007). It is implemented in Matlab/Simulink (MathWorks, 1996). Four types of entities are incorporated in the model external SC entities (e.g. suppliers), refinery functional departments (e.g. procurement), refinery units (e.g. crude distillation), and refinery economics. Some of these entities, such as the refinery units, operate continuously while others embody discrete events such as arrival of a VLCC, delivery of products, etc. Both are considered here using a unified discrete-time model. The model explicitly considers the various SC activities such as crude oil supply and transportation, along with intra-refinery SC activities such as procurement planning, scheduling, and operations management. Stochastic variations in transportation, yields, prices, and operational problems are considered. The economics of the refinery SC includes consideration of different crude slates, product prices, operation costs, transportation, etc. The impact of any disruptions or risks such as demand uncertainties on the profit and customer satisfaction level of the refinery can be simulated through IRIS. 

The measurements of net profit, cash flow, and ROI tell the manager whether a firm is making money and what its relative performance is. Obviously when managers need to make decisions in the course of daily business, they will try to increase profit, cash flow, and ROI. But, it is not always immediately obvious in many decisions which alternative will maximize this return. The break-even analysis and present value analysis do provide information about investments, but they do not provide insight into decisions about how to schedule the equipment and which orders to accept given certain capacity constraints. 

The net income statement is used to compute the annual net income or deficit of a project. The statement differs from the cash fbw schedule because it shows incomes and costs and not revenues and expenditures by period. The accrual concept is used in which income from operations is associated with the costs needed to produce the income during the same period. In financial analysis for feasibility studies, it is usually assumed that inventories are the same at the beginning and end of each year. The derivation of costs, revenues, and investments are shown in Figure 21.2. The income statement is related to the balance sheet statement as shown in Figure 21.3 such that the annual profit (or loss) increases (or reduces) the net worth of the company. The balance sheet statement shows the accumulated wealth of a company (assets) and how these assets are financed fliabilities). By definition both sides are equal. 

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