Galorath ROI Calculator

COMPUTERIZED RETURN ON INVESTMENT ANALYSIS

EXECUTIVE SUMMARY

This software based “Return On Investment (ROI)” analysis program is intended for businesses that in need for computer based forecasting investment tools. This analysis system can be used for analyzing organization’s cost and benefit forecasting values in a sense of investment opportunities. This project is being developed by Binghamton University senior students for almost four year, and it’s supervised by Galorath organization’s one of the IT Professionals Lee Fischman. This year, project actually has the potential for being sell in the software market, which is the biggest step of this on-going student based software development process. Organizations, by using this software based analysis solution, can achieve efficiency reports on their planned investments, and compare efficiency levels of other investment plans. This software will give the organization the perspective of cost and benefit values in a user interactive point, and break even points of an investments will be much easier to understand and analyze.

WHAT IS RETURN ON INVESTMENT?

“Return On Investment” is an analysis type that is being done, when the organizations plan new investments to their existing resources. Purpose of computerized ROI systems are measuring net gained return values from the market, analyzing the demand values on the market, and create what-if analysis to be ready for every aspect of the business. Most of the organizations need their ROI analysis when they plan to acquire another company, or create another start up for their organization. Acquiring can be a vertical integration which is based on holding all of the level of supply chain of the production for their business needs. Nowadays, most of the companies does not vertical integrate their supply chains but everyday deficiencies on that type of model increases because of the labor right management errors in the far east countries such as China, Taiwan. Thus, these problems force organizations bring back the production and hold all the aspects of supply chain within their organizations. To do that, they have to analyze the investment values, and strategically plan their forecasted benefits and costs. Furthermore, organizations need to use the historical data that they hold on their data warehouses. It can be understood that, this kind strategically decisions can’t be leaved to basic business analysts. There is a need for computerized business intelligence and our ROI software provides this needed segment for organizations.

CONCEPT OF THE SOFTWARE SYSTEM

To achieve what the organization need there is a need for strong training bases. Training base for our software is pure values that are gathered from our data grid in the Graphical User Interface. Our software development had to utilize these values to get the best out of these base values. Basic return on investment analysis consists of three values. These are segmented as least, likely and most. These value segments represent organizations forecast about the assigned item for that year, or the following years that follow. Using three dimensional data is not and should not enough for making important strategic decisions for any organization. Therefore, our software solution does not only use those there values. Our software gathers those values, and by using Monte Carlo simulation algorithm it creates thousands of sample values. What is Monte Carlo simulation? : Monte Carlo simulation is a computerized mathematical technique that allows people to account for risk in quantitative analysis and decision making. This simulation performs analysis by building models of possible results by substituting range of values for any factor that has inherent uncertainty, in our case, least, likely and most values. It then calculates results over and over, each time using different set of random values from the probability functions. Using probability distributions, variables can have different probabilities of different outcomes. This gives organization number of different perspectives of those three dimensional cost and benefit values. While the simulation algorithm works in our self-designed software, values are sampled at random form the input probability distribution values which are provided by the user of our software on the analysis page of our graphical user interface. We use this simulation algorithm to furnish the decision maker with a range of possible outcomes and the probabilities they will occur for any choice of actions. It shows us the extreme levels of possible benefit and cost values within least, likely and most dimensions. After calculating the likely outcome values of the investment we provide user with a set of charts and graphics. More information about this is not the next segment “Used Libraries and Technologies”

USED LIBRARIES AND TECHNOLOGIES

For software development process itself, and the software itself we used couple of outsourced technologies. Since our software is a Windows based application, we used the programming language of C#. While doing this we used the Microsoft Visual Studio. Our team is supervised by Mr. Fischman, and the only way to communicate with him is through the web services. WebEx is the communication tool, our team used while discussing improvements, deficiencies and changes during the software development process. For the software itself, to show Monte Carlo simulated values to the user in much more intuitive way, we used the open sourced library of ZedGraph. Our project uses three different graphs. ZedGraph is a GNU licensed SDK for .NET framework and provided lots of opportunities which made our product much more user friendly. Here are the some examples of those graphical instances:

DESIGN OF THE SOFTWARE

Our software design consists of number of C# library classes and ZedGraph library. Our software first gathers data from the organization’s user from its Data Grid in three dimensions: least, likely and most. These values are being computed in the Monte Carlo algorithm processes. Also these processes get input values from the Analysis segment of the program, which helps user to determine sampling values. The last point of project is showing graphs to the user, and letting him/her to get this report as a PDF file, XML or as an Microsoft Excel file.

IMPROVEMENTS

The Data Grid improvements are the most essential one. Since our whole software design depends on the values gathered from the data grid, any defects on those values would cause our program to crash or more badly, give wrong calculated errors. Now, our data grid works in a fashion of flawless. It controls every possibility of input from the perspective of user. Second to the Data Grid, there was no way of adding “Items” to invest in our program. We achieved our goal of adding multiple items, copying those items and pasting those values from other ROI projects. Our graphical user interface is the face of our software and the face of our project in general. What was missing on that face were sense organs. There were no menu items before. We improved the navigation bar and now, it is fully functional.

FUNCTIONALITIES OF THE PROGRAM

Just as stated in the executive summary, our software solution to the ROI problem is the highest level of this project ever got. To give the insight of our software capabilities, this segment will give information about the functionalities that we provide to our users. There is five menu items in application menu bar as in “File”, “Edit”, “View”, and “Help”. Every item on the menu can be accessed by the usage of key shortcuts. File segment provide the option of “New”, also the option of “Open”, “Save”, “Save As”, and lastly “Print”. File segments “New” option provides user to chance of creating a new Return On Investment project process. Also, File segments “Open” option provides user to chance of importing an XML or Excel file to process. File segments “Save” option saves the process as a XML file. On the other side “Save As” option saves the process as other than the XML format, such as Excel and PDF. XML Schema and DTD functionalities to control XML data files compatibility for our processes are added to the software. Edit segment of the navigation bar provides user to chance of adding a new item of investment process. There are other functionalities, such as one of them is deleting the existing item from the investment process. If one of the investment item is selected then there are couple more functions to process. These are cut, copy, and paste the item. Also there is an added functionality for cut, copy and paste menu items. Reaching these items through keyboard shortcuts is available. View segment of the navigation bar is another function of the software. Through the usage of this segment user can reach the Benefit screen, the Cost screen and lastly the Analysis screen of the general project user interface. The other segment on the navigation bar is “Help” segment. This segment provides information about the project usage. Of course there are lots of updates to the old version in sense of data grid of the project screen. Data grid is the vital component of the project because all of the investment analysis is being done with the values gathered from this grid. This data grid can be called as “Entry Grid”. On the Benefit and Cost screens has this “Entry Grid”. This provides user to functions of changing forecasted investment values with respect to their desire. Since “Entry Grid” is the most important software based functionality provided in this project there is no harm to get in more detail. The data structure of the “Entry Grid” is tree structure based. Every investment item is a node of the tree, and least, likely and most values are the children of that node. Whole investment items combine together and create the tree structure. On the old version of our project there was no chance of putting values to the grid directly. The only way to change values was updating the XML value on another editing program. This issue solved, and now our software solution provides the functionality of editing the “Entry Gird” dynamically while program runs. There some specific functionalities provided by our software to enhance the performance of the return on investment analysis for “Entry Grid”. In “Entry Grid” when date sequence added, or changed, investment items data format themselves for the new scales. Also in our software, right click event is being handled for “Entry Grid”. Our software catches the event, afterwards serves the functionality for adding the new investment data item, or deleting the selected investment data item. In terms of input files, there are some functions that our development team created. These are when an XML file is imported get into action. When an XML file opened, first, controlling the availability of all of the values is being done. Second, function of the software while handling XML file is, benefit and cost values are being processed and put to the Entry Grid in respect to their least, likely or most tags. In the both of the cost & benefit screens there is a graph developed using ZedGraph library. User would want to right click on the graph. This event is being handled by the software and pop up menu show up. Inside of this menu, there are couple functionalities; ‘copy’ which copies the graph itself for future use, ‘save image as’ which copies the graph as an image and lets user to save it as an image file, ‘print’ function which pop ups the interaction window for printing the graph, ‘show point value’ functionality provides scaling to the cost and benefit numbers to the user. ‘Zoom’ and ‘Un-zoom’ functionalities are very straightforward in terms of a graph standpoint. Also, there is an option of setting the scale to the default in the same pop up menu. In the analysis screen, there is a dynamic Monte Carlo histogram provided to the user. This histogram is printable if it’s right clicked. Furthermore, in the analysis screen, the functionalities provided for graph of the values in the other screen segments are present in this screen too. In the screen, there is a segment of updating the Monte Carlo analysis sampling values. This is important for the analysis outcome. User defined sampling values determine the return values of the investment. These parameters are ‘Analytic Estimation’, ‘Monte Carlo Average NPV’, ‘Monte Carlo Minimum NPV’, and ‘Monte Carlo Maximum NPV’. In addition to Monte Carlo histogram, in the analysis screen, there are two pie charts which created with the values of benefit and cost items. One of the charts is responsible for the values of the items, and the other chart is responsible for the benefit values of the items. Lastly, there is a chance of saving the investment process as a PDF file, which includes the pie charts, histogram of Monte Carlo, and the graph that represents the values of cost, benefit, and the net values.

USAGE OF THE SOFTWARE

BASIC SCENARIO

In this section, a basic illustration will be given as an example for easing the understanding of the project. This program can be used by any company that should make a decision for investment. In the following illustration an oil company that is thinking about constructing a new oil station is considered. Opening brand new oil station will obviously have some costs as well as profits. Our software is provided by these forecasted values of costs and benefits. For each year and for each item there should be a cost and a benefit value. Each cost and benefit values has three dimensions:

• Least
• Likely
• Most

To name some of the cost items of investment of constructing a brand new oil station are:

• Rent of the venue
• Salaries of the employees
• Construction costs
• Utilities (Gas, Electric)
• Tax

To name some of the benefit items on the investment process:

• The net income from the oil sale level.
• The income that comes from the grocery store that being held inside of the gas station venue.

After filling the entry grid with the desired values, then analyzing the graph that provided by the return on investment software will help the user to make strategic decisions. Here is the couple screen shots of the explained example:
Cost Screen:

Benefit Screen:

Graphs & Charts of the Return on Investment Analysis:

FEASIBILITY AND PERFORMING AREAS

Return on Investment process is a must for all organizations in the market. With the increasing number of CRM, ERM, SCM software implementations, today, almost every organization either holds a data warehouse to process these data in their Business Intelligence departments for reporting to the mangers, or they use Cloud based services. In this respect, managers need information that created by computerized processes to make their strategic decisions. Decision management systems for business analysts and managers are in the almost every organizations network. Having an easy to install Return on Investment software based analysis solution for forecasting the benefits and costs of the investments fulfills a vital part in the industry of Business Intelligence. Galorath’s ROI software is the vital tool needed by the business analysts whom are not very good on programming the management automation software to their specific needs. Our software product is easy to install, and very straight forward to use. Fast analysis of the planned investments will only help decision makers of every organization.

ABOUT THE TEAM

• Burcin DERYA
• Cem ISKIR
• Goksu TOPRAK
• Hakan KARADIS