Company Model for Income Prediction

Abstract

Corporate financial planning requires periodic reestimates of future revenues and costs. The Celanese Chemical Company is using a simulation model to supplement single-point estimates of net income with a range of values and their associated probabilities. This permits conservative or optimistic planning within the framework of risk. Inputs to this model include subjective estimates of each major product's sales volume, net sales return, and cost of manufacture and raw material. The model, written in General Purpose Simulation System (GPSS), also incorporates a supply and demand material balance for evaluating the cost effects of forecasted production, feed capacities, and feed-to-product ratios.