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Financial modelling packages for microcomputers
applications
Financialmodellingpackages formicrocomputers Comparing spreadsheets with morecomplexpackages by GRAHAM SUMMERS
T
he choice of microcomputers, and financial programming packages to run on them can be bewildering. There are at least 30 financial modelling systems currently sold in significant numbers on desktop microcomputers in the UK Packages are either actually written and intended for novice users of personal microcomputers, or have been developed to mirror, as much as possible, financial modelling facilities previously only available on larger, more expensive systems - i.e. timeShari; kg systems, minicomputers and mainframes.
Abstract: A consultant reviews the various financial model&g and reporting facilities available on desktop computers. In particular, he highlights the difference between software packages suitable for the novice user of personal computers and those required for the development of major financial systems. Keywords: Computer software, computer applications, microcomputers.
Graham Planning
vol
24 no 9
november
1982
Summers is managing Consultancy Ltd.
0011-684)3/82/090015~3$03.00
0
director
of
1982 Butterworth
Calc products The first category of software largely consists ofthe so-called ‘Calc’ products including packages such as VisiCalc, SuperCalc, PlannerCalc, CalCstar, Multiplan etc. These packages are typically based on a two dimensional spreadsheet of rows and columns visible on the computer screen. These electronic spreadsheets allow the entry of descriptions, financial calculations and, af course, data itself The visual appeal of these packages makes them, on the whole, easier to use than the more powerful packages. Their strengths are speed of learning and execution; as well as their price which ranges from between E40 and fJ50. They are, on the whole, good value for mone!y. The spreadsheet size varies according to the package and the memory size of the machine. Typically, they consist of about 100 columns and 500 lines. At best, the calculations (or Rules or Formula or logic as these packages refer to them) are written to use precise English-like statements. For example, NET = SALES - EXPENSES, or simple formulae such as +B3 = Bl B2. C)n the whole, the latter ‘talc’ packages are general purpose - that is
& Co (Publkhers)
Ltd.
15
to say they could be used for scientific and engineering applications as well as financial modelling. Those more specifically tailored to the financial marketplace include a full range of useful functions such as Net Present Value; conditional testing of greater than; less than; equal to etc; a sum of function to add lines or columns, GROW BY to increase a starting value by a percentage and many others. These spreadsheet packages allow the rapid creation of models and the ability to change variables and instantly recalculate the results. They have been responsible for the sale of countless microcomputers. Roughly 25% of all Apples sold are accompanied by the VisiCalc package. They are extremely successfitl for tackling applications such as the rapid setup of single spreadsheets, budgets, cash forecasts etc. They are not suited for, say, the setup of a major corporate consolidation or an integrated budgeting and monthly reporting system. Ease of use is the biggest selling point along with price. The simplicity of transferring the familiar piece of paper to the screen of a computer where one types calculations through the keyboard rather than writing with the pen allows the user to get going quickly. Unfortunately, software houses are obsessed with product features. If a competitive product possesses a ‘GOTO’ statement allowing more powerful modelling then others must implement that feature as soon as possible. The more features and therefore commands that are built into a product by definition, the more complex it becomes to operate. Strangely enough then, spreadsheet packages are becoming in some instances more complicated to operate as their user base increases.
forward; internal rate of return etc. They separate their constituent elements into files on.a desk and are used when required. Financial calculations and accounting relationships are defined in a ‘Logic’ file. As well as a Rules or Logic file, there are files containing numbers (DATA) and instructions on the desired appearance of a report (Report Specification File). One file can be added to another, so consolidating matrices of Rows and Columns i.e. reports. These products are capable of sophisticated applications - product, divisional, corporate consolidated monthly results compared to budget, reforecasts etc. They have one fundamental weakness. They have been developed to mirror facilities available on more powerful and costly systems, yet few senior financial executives will have laid hands on such systems. Programmers have not been particularly innovative in the area of financial m~ell~g. The mi~ocomputer offered an exciting opportunity for something new. Yet, what we have (apart from the ‘talc’ spreadsheets) has been around for some time - now operating on a smaller box. The powerful modelling systems sold in the more traditional computer markets require specialist skills, training and in-depth use. In the mass market of novice users of personal computers, this is unsatisfactory. At present, the genuine ease ofuse is sacrificed in the name of sophistication. However, the prospect of a mainExample
ofoutput from
frame style modelling system on the desk is still an exciting one. Once again, price is attractive - typically between K400 and El 000 a copy. These packages are capable of large models and financial reporting systems. The size of the model again varies from package to package. Normally, they have a basic model or matrix size that allows a combination ofRows & Columns within between 24000 cells, (i.e. a 13 column report with 40 lines would be matrix of 520 cells). These model sizes can be expanded with memory expansion boards on the 64 kbyte micros or are usually larger by definition on the more powerful 128 kbyte machines. A 16 000 cell model on a desktop microcomputer is practical. Some systems possess a virtual memory capability - this technique allows the use of the disc for additional modelling space when memory runs out. It can be painfully slow and is not recommended for a model of any considerable size (about 3 000 cells as a rough maximum).
Strong on reports These systems do have limitations. The finite processing power of the microcomputer means that these packages are not capable of some of the very complex applications that could run on a timesharing mainframe. However, they are particularly strong in the area of financial reporting. Report formats are truly custom
the MARS package.
__w--TV
ADAWOR
FINANCIAL
ANAL== TOTAL
1982 1100.00 88.00
1200.00
1)2350eo0
~~8~o.00
55000~00
60500.0;
______--220.00 -550.00
--;;;;-;0 . 1936.00
96.80
1500.00 106.48
2OOO.OO 117.12
Mainframe packages The more advanced ing packages offer functions as well financial functions tion depreciation;
16
financial modellfull arithmetic as innumerable NPV, amortizatax loss carry
6800.00 w3.40
300527.53
_________ -330.00 _________
69877.5" 66550.00 _________
~~~~~~~~~ 73200.00 _________ 58560.00 *3292.50 23424.00 9317.00 __ ______---
. . .._------ -;;;;;:50 2904.00 _________ ___------
35136.00 ___..-----
30525O.GO _____---81142.50 32X57.00 ____----48685.50 _____----
data processing
applications designed, and large consolidations are also possible. It is necessary to evaluate the timings of your applications before installing such an application. It should also be remembered that a fixed disc unit is required for large applications particularly if they require full automation. Herein lie other powerful facilities these packages possess, such as the ability to build total systems that may be operated automatically. This is achieved by running a sequence of commands from a file. Menus can also be created. It must be said that these areas of menus and automation are the most complicated and do require in-depth training and continued support from the supplier. As long as expectations are realistic - that for example a consolidation of 60 subsidiaries will take 20 minutes to run - and one is dealing with a professional supplier, results can be spectacularly successful. Their weaknesses lie in the area of ease of use, particularly regarding the mass of users with no modelling experience at all. Often documentation on these systems is woefully inadequate. Unlike the ‘talc’ packages, they make little effective use of the screen. Packages with an interface to the computer language in which they are written (e.g. PASCAL) are capable of complicated applications, but here we are entering the realms of program writing. On the whole, these packages are well received and successfully used. It should be remembered that users of micromodelling have little experience of either computing or financial modelling. There are basic operating systems tasks that have to be learnt file organization; copying diskettes; even using printers. Combine this lack of experience with often a lack of vital support and it is inevitable that some users will be dissatisfied. This is not less true of financial modelling on any other type of computer system. The real difference with microcomputers is the sheer numbers of new users in place so quickly.
vol 24 no 9
november
1982
1
25% of Apples sold are accompanied
by VisiCalc.
These packages include MicroModeller, Microfinesse, Mars, Fastplan, Micro - EPSFCS, and many others.
Future developments Two hardware developments will have an impact on financial modelling systems. The advent of more powerful 16 bit microcomputers will permit not just more complex modelling applications, but also an opportunity for software houses to invest more effort in achieving ease of use while retaining a sophisticated capability. Secondly, the availability of low networks is cost microcomputer important. The ability to share several hundred megabytes of data storage among dozens of users throughout a building provides the opportunity to create a single corporate financial database which each user can access with his or her personal computer. It will be possible for accounting and systems staff to create an up-todate
source of financial information that each user employs for an individual purpose. This development should bring the power of the microcomputer closer to the desks of senior management. Even though microprocessors have brought powerful desktop modelling at a low cost, these systems are not used by decision makers. They are typically used ‘by a specialist ‘modelling’ expert (a potential bottleneck) or by middle managers. This unsatisfactory situation will be changed by a new type of software. That software will possess greater inherent financial intelligence removing many onerous tasks required by current systems and achieve far greater ease of use. The current modelling packages already possess initially striking graphics capability. However, this is another area where improved hardware and software will be rapidly forthcoming. 0
Planning Consultancy Ltd, 46d7 Pall Mall, London SWlY SJG, UK. Tel: 01.839 3143.
17
Financialmodellingpackages formicrocomputers Comparing spreadsheets with morecomplexpackages by GRAHAM SUMMERS
T
he choice of microcomputers, and financial programming packages to run on them can be bewildering. There are at least 30 financial modelling systems currently sold in significant numbers on desktop microcomputers in the UK Packages are either actually written and intended for novice users of personal microcomputers, or have been developed to mirror, as much as possible, financial modelling facilities previously only available on larger, more expensive systems - i.e. timeShari; kg systems, minicomputers and mainframes.
Abstract: A consultant reviews the various financial model&g and reporting facilities available on desktop computers. In particular, he highlights the difference between software packages suitable for the novice user of personal computers and those required for the development of major financial systems. Keywords: Computer software, computer applications, microcomputers.
Graham Planning
vol
24 no 9
november
1982
Summers is managing Consultancy Ltd.
0011-684)3/82/090015~3$03.00
0
director
of
1982 Butterworth
Calc products The first category of software largely consists ofthe so-called ‘Calc’ products including packages such as VisiCalc, SuperCalc, PlannerCalc, CalCstar, Multiplan etc. These packages are typically based on a two dimensional spreadsheet of rows and columns visible on the computer screen. These electronic spreadsheets allow the entry of descriptions, financial calculations and, af course, data itself The visual appeal of these packages makes them, on the whole, easier to use than the more powerful packages. Their strengths are speed of learning and execution; as well as their price which ranges from between E40 and fJ50. They are, on the whole, good value for mone!y. The spreadsheet size varies according to the package and the memory size of the machine. Typically, they consist of about 100 columns and 500 lines. At best, the calculations (or Rules or Formula or logic as these packages refer to them) are written to use precise English-like statements. For example, NET = SALES - EXPENSES, or simple formulae such as +B3 = Bl B2. C)n the whole, the latter ‘talc’ packages are general purpose - that is
& Co (Publkhers)
Ltd.
15
to say they could be used for scientific and engineering applications as well as financial modelling. Those more specifically tailored to the financial marketplace include a full range of useful functions such as Net Present Value; conditional testing of greater than; less than; equal to etc; a sum of function to add lines or columns, GROW BY to increase a starting value by a percentage and many others. These spreadsheet packages allow the rapid creation of models and the ability to change variables and instantly recalculate the results. They have been responsible for the sale of countless microcomputers. Roughly 25% of all Apples sold are accompanied by the VisiCalc package. They are extremely successfitl for tackling applications such as the rapid setup of single spreadsheets, budgets, cash forecasts etc. They are not suited for, say, the setup of a major corporate consolidation or an integrated budgeting and monthly reporting system. Ease of use is the biggest selling point along with price. The simplicity of transferring the familiar piece of paper to the screen of a computer where one types calculations through the keyboard rather than writing with the pen allows the user to get going quickly. Unfortunately, software houses are obsessed with product features. If a competitive product possesses a ‘GOTO’ statement allowing more powerful modelling then others must implement that feature as soon as possible. The more features and therefore commands that are built into a product by definition, the more complex it becomes to operate. Strangely enough then, spreadsheet packages are becoming in some instances more complicated to operate as their user base increases.
forward; internal rate of return etc. They separate their constituent elements into files on.a desk and are used when required. Financial calculations and accounting relationships are defined in a ‘Logic’ file. As well as a Rules or Logic file, there are files containing numbers (DATA) and instructions on the desired appearance of a report (Report Specification File). One file can be added to another, so consolidating matrices of Rows and Columns i.e. reports. These products are capable of sophisticated applications - product, divisional, corporate consolidated monthly results compared to budget, reforecasts etc. They have one fundamental weakness. They have been developed to mirror facilities available on more powerful and costly systems, yet few senior financial executives will have laid hands on such systems. Programmers have not been particularly innovative in the area of financial m~ell~g. The mi~ocomputer offered an exciting opportunity for something new. Yet, what we have (apart from the ‘talc’ spreadsheets) has been around for some time - now operating on a smaller box. The powerful modelling systems sold in the more traditional computer markets require specialist skills, training and in-depth use. In the mass market of novice users of personal computers, this is unsatisfactory. At present, the genuine ease ofuse is sacrificed in the name of sophistication. However, the prospect of a mainExample
ofoutput from
frame style modelling system on the desk is still an exciting one. Once again, price is attractive - typically between K400 and El 000 a copy. These packages are capable of large models and financial reporting systems. The size of the model again varies from package to package. Normally, they have a basic model or matrix size that allows a combination ofRows & Columns within between 24000 cells, (i.e. a 13 column report with 40 lines would be matrix of 520 cells). These model sizes can be expanded with memory expansion boards on the 64 kbyte micros or are usually larger by definition on the more powerful 128 kbyte machines. A 16 000 cell model on a desktop microcomputer is practical. Some systems possess a virtual memory capability - this technique allows the use of the disc for additional modelling space when memory runs out. It can be painfully slow and is not recommended for a model of any considerable size (about 3 000 cells as a rough maximum).
Strong on reports These systems do have limitations. The finite processing power of the microcomputer means that these packages are not capable of some of the very complex applications that could run on a timesharing mainframe. However, they are particularly strong in the area of financial reporting. Report formats are truly custom
the MARS package.
__w--TV
ADAWOR
FINANCIAL
ANAL== TOTAL
1982 1100.00 88.00
1200.00
1)2350eo0
~~8~o.00
55000~00
60500.0;
______--220.00 -550.00
--;;;;-;0 . 1936.00
96.80
1500.00 106.48
2OOO.OO 117.12
Mainframe packages The more advanced ing packages offer functions as well financial functions tion depreciation;
16
financial modellfull arithmetic as innumerable NPV, amortizatax loss carry
6800.00 w3.40
300527.53
_________ -330.00 _________
69877.5" 66550.00 _________
~~~~~~~~~ 73200.00 _________ 58560.00 *3292.50 23424.00 9317.00 __ ______---
. . .._------ -;;;;;:50 2904.00 _________ ___------
35136.00 ___..-----
30525O.GO _____---81142.50 32X57.00 ____----48685.50 _____----
data processing
applications designed, and large consolidations are also possible. It is necessary to evaluate the timings of your applications before installing such an application. It should also be remembered that a fixed disc unit is required for large applications particularly if they require full automation. Herein lie other powerful facilities these packages possess, such as the ability to build total systems that may be operated automatically. This is achieved by running a sequence of commands from a file. Menus can also be created. It must be said that these areas of menus and automation are the most complicated and do require in-depth training and continued support from the supplier. As long as expectations are realistic - that for example a consolidation of 60 subsidiaries will take 20 minutes to run - and one is dealing with a professional supplier, results can be spectacularly successful. Their weaknesses lie in the area of ease of use, particularly regarding the mass of users with no modelling experience at all. Often documentation on these systems is woefully inadequate. Unlike the ‘talc’ packages, they make little effective use of the screen. Packages with an interface to the computer language in which they are written (e.g. PASCAL) are capable of complicated applications, but here we are entering the realms of program writing. On the whole, these packages are well received and successfully used. It should be remembered that users of micromodelling have little experience of either computing or financial modelling. There are basic operating systems tasks that have to be learnt file organization; copying diskettes; even using printers. Combine this lack of experience with often a lack of vital support and it is inevitable that some users will be dissatisfied. This is not less true of financial modelling on any other type of computer system. The real difference with microcomputers is the sheer numbers of new users in place so quickly.
vol 24 no 9
november
1982
1
25% of Apples sold are accompanied
by VisiCalc.
These packages include MicroModeller, Microfinesse, Mars, Fastplan, Micro - EPSFCS, and many others.
Future developments Two hardware developments will have an impact on financial modelling systems. The advent of more powerful 16 bit microcomputers will permit not just more complex modelling applications, but also an opportunity for software houses to invest more effort in achieving ease of use while retaining a sophisticated capability. Secondly, the availability of low networks is cost microcomputer important. The ability to share several hundred megabytes of data storage among dozens of users throughout a building provides the opportunity to create a single corporate financial database which each user can access with his or her personal computer. It will be possible for accounting and systems staff to create an up-todate
source of financial information that each user employs for an individual purpose. This development should bring the power of the microcomputer closer to the desks of senior management. Even though microprocessors have brought powerful desktop modelling at a low cost, these systems are not used by decision makers. They are typically used ‘by a specialist ‘modelling’ expert (a potential bottleneck) or by middle managers. This unsatisfactory situation will be changed by a new type of software. That software will possess greater inherent financial intelligence removing many onerous tasks required by current systems and achieve far greater ease of use. The current modelling packages already possess initially striking graphics capability. However, this is another area where improved hardware and software will be rapidly forthcoming. 0
Planning Consultancy Ltd, 46d7 Pall Mall, London SWlY SJG, UK. Tel: 01.839 3143.
17