Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System

Transcription

1 Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System Nares Anannavee Faculty of Information Technology, Phetchaburi Rajabhat University 38 M.8 Na Wung, Muang Phetchaburi, Phetchaburi, Thailand Panchit Longpradit Faculty of Information Technology, Phetchaburi Rajabhat University 38 M.8 Na Wung, Muang Phetchaburi, Phetchaburi, Thailand Natasha Dejdumrong Department of Computer Engineering, King Mongkut s University of Technology Thonburi 126 Pracha-Utid Rd., Tungkru, Bangkok, Thailand natasha@cpe.kmutt.ac.th Sayam Aroonsrimorakot Faculty of Environment and Resource Studies, Mahidol University 999 Phuttamonthon 4 Rd., Salaya, Nakhon Pathom, Thailand sayamthai88@gmail.com Abstract - Traditional financial analysis methods do not take into consideration feedbacks received when the current analysis is performed, and neither do allow for continuous improvements of the process. This causes difficulty and time consuming. To ensure that the right investment decision about Para-rubber plantation, which is an important economic plant in the ASEAN Economic Community (AEC), is made before the project commencement is what of investors requirements. Therefore, the Quality Financial Analysis of Para-Rubber on google-maps prototype system (QFARM) is proposed and developed as a tool to resolve these problems. This paper presents the QFARM as a decision-making tool by integrating the Deming's Cycle, the financial analysis techniques and the data visualization techniques, in order to assist the investors in making decisions about investment in Para-rubber plantation, based on 3 indicators, including the Net Present Value (NPV), the Benefits-Cost Ratio (BCR), and the Internal Rate of Return (IRR). Moreover, the QFARM compares the financial data of each group of Pararubber plant s species in case of the same conditions, recommends the best species for the investment, and displays the sensitivity analysis results in graphical forms for each condition. A usability test was conducted to prove the QFARM applicability and usefulness. The questionnaire with a reliability value of 0.84 was used to collect the data from 5 Para rubber expert users from Office of the Rubber Replanting Aid Fund, Thailand. Overall, they accepted the QFARM prototype system at = 4.25, S.D. = 0.68, accounted for 91%. 41

2 Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System Keywords - Para-Rubber, Financial Analysis, Net Present Value, Benefits-Cost Ratio, Internal Rate of Return, Sensitivity Analysis I. INTRODUCTION Para-rubber (Hevea brasiliensis Muell) is one of the major industrial plants in Thailand and in the ASEAN region. Thailand has been a leader in the production and export of rubber as raw materials to many parts of the world for over 20 years. At present, Thailand produces million tons of rubbers per year, with this amount, million tons or approximately 83-88% are exported, and only 12-14% are used in the country, and 7-9% are kept in the remaining stock. In 2015, the ASEAN Economic Community (AEC) will become fully functional, Para rubber, which is one of the main crops of many countries in the AEC will have a vital role, [1]. However, since the prices of rubber are very volatile, the investors are more hesitant and skeptical in the Para rubber plantation investment. Furthermore, the lack of knowledge about the investment decisions in rubber plantations, particularly the shortage of basic information related to the production cost make the decisions become even more difficult. Moreover, the investment and the operation costs are relatively high, and the plantation requires a long period of time to harvest and distribute the products. So, if the investors do not investigate all possibilities related to the Pars rubber plantation thoroughly, the wrong decisions will be made and this would result in the loss of investment opportunity. This research therefore, presents a prototype system of the Quality Financial Analysis of Para-rubber on Google-Maps as a tool for analysis and decision-making, as well as to reduce the investment risks of Pararubber plantation for those who are interested in investing in plantation. This research applied the quality methodology, Deming cycle [2], in conjunction with the financial analysis techniques, and the data visualisation techniques to create a prototype system that can improve the financial analysis for Pararubber plantation. II. LITERATURE REVIEWS Financial information is the basis for financial analysis, planning and decisionmaking. The financial analysis is used to assess the financial strengths and weaknesses of a firm on the basis of accounting data and financial statements [3]. It can be done by evaluating the relationships between the items of the items of the profit and loss, and the balance sheet. This analysis is useful for the investors in Para-rubber plantation. Moreover, the analysis helps decision-making in the investment of the Para-rubber plantation, and the financial information can be used to set up the guidelines for promoting policy, planning, or improvement of the investment. The common financial analysis tools that can be used to determine the cost of capital of the Para-rubber plantation include the net present value (NPV), the benefits-cost ratio (BCR), the internal rate of return (IRR) [4], and the sensitivity analysis [5]. A. The Net Present Value The net present value is the difference between the present values of an investment project s cash inflows and the present value of its cash outflow for determining whether or not the project is an acceptable investment [4, 6, 7]. This is defined as: when: B t is the benefit of the project in year, t. C t is the cost of the project in year, t. I t n is the discount rate. is the duration time of the project from year 1, 2,, to n. is the life of the project. 42

3 Nares Anannavee, Panchit Longpradit, Natasha Dejdumrong, and Sayam Aroonsrimorakot If the net present value is positive, then the project is acceptable, since it promises a return that is greater than the required rate of return. If the net present value is zero, then the project is acceptable, since it promises a return that is equal to the required rate of return. If the net present value is negative, then the project is not acceptable, since it promises a return that is less than the required rate of return. B. The Benefits-Cost Ratio The ratio of return on investment (benefitscost ratio), also known as the profitability index, is a comparison of the present value of the income to the present value of the cost [4, 5]. This is defined as: D. Sensitivity Analysis The feasibility study of Para-rubber plantation investment can be affected if there is a change of the economically related factors that affect income and cost, such as the price of rubber sheet is reduced, or the wage is increased, and so on. For these reasons, it is necessary to perform the sensitivity analysis of the project. Sensitivity analysis is a general technique to find out how the NPV of a project changes if sales, labor or material costs, the discount rate, or other factors vary from one case to another. This analysis exists to help executives deal with the uncertainty inherent in all realistic financial projections. In simple terms, sensitivity analysis is a what if study [5, 8]. III. RESEARCH METHODOLOGY The investment is attractive when its BCR exceeds 1.0 and is unattractive when its BCR is less than 1.0. C. The Internal Rate of Return The internal rate of return is the rate of return promised by an investment project over its useful life. It is computed by finding the discount rate at which the net present value of an investment project is zero (NPV=0) that makes the present value of the costs or expenses of the investment equal to the present value of the income or interest from investments (BCR=1) [4, 6, 7]. This is defined as: The studies of [9] had proposed Pararubber Quality Financial Analysis System Model, which was a collection of the secondary data of the financial analysis and the reports of costs and benefits of Para-rubber plantation for summary of the basic information and a collection of the rule of the financial analysis as NPV, BCR, and IRR, for defining the criteria for investment decisions. Within this model, the Deming cycle was integrated. In this study, the Quality Financial Analysis of Para-rubber on Google-Maps Prototype System, which here in after is referred to as QFARM prototype system, has been developed by integrating the Para-rubber Quality Financial Analysis System Model, the sensitivity analysis techniques, and the data visualisation techniques into the process of system development life cycle (SDLC) using the Incremental Waterfall Model, as shown in Fig 1. The criterion for project selection is to choose to invest in the project if IRR is greater than the interest rate of funds or loans. The IRR value is useful for determining whether or not the project should be undertaken. 43

4 Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System Fig 2. The Architecture of the QFARM Prototype System The functions of the QFARM prototype system include the following: Fig 1. Diagram of the System Development of QFARM Prototype System The architecture of the QFARM prototype system consists of 4 main modules: Knowledge Base (Para rubber plantation database), Visualisation (Google Maps), QFARM application (Financial Analysis Calculation), and User Profile (Preliminary information on the application requirements), as shown in Fig 2. - It can perform the financial analysis for the Para rubber plantation, based on NPV, BCR, and IRR. - It can use the Google Maps to visualize the resulting data from the financial analysis. - It can display the decision making for the investment within thecriteria established for the financial analysis. - It can determine the rubber price and the interest rate in relation to the input automatically. - It can display the comparisons of the financial data of each group of Para rubber plant s species in case of the same conditions and recommends the best species for the investment. - It can modify the costs, or the benefits, as a percentage of the change in what-if case. - It can display the results in the form of graphs and tables. These graphs are the trend of changes in costs or benefits, which is integrated with the sensitivity analysis. - It can save and adjust the input data and the calculation for the next usage. To prove the applicability and usefulness of the QFARM prototype system, the usability test has been conducted. The reliability questionnaire was designed by subject 44

5 Nares Anannavee, Panchit Longpradit, Natasha Dejdumrong, and Sayam Aroonsrimorakot specialists [10], and was then used to collect the data from 5 Para-rubber expert users from the Office of the Rubber Replanting Aid Fund, Thailand. The questions in the questionnaire, adapted from Khan and Adnan [11], included functionality, effectiveness, consistency, architectural and visual clarity, user reaction, and usefulness. The results were then analysed by statistics, including percentage (%), mean ( x ) and standard deviation (S.D.) IV. RESULTS AND DISCUSSION Fig 4. The Display of the Recommendation of the Decision Making with the Financial Details. The QFARM prototype system was implemented with ASP.NET 4.0 C# and Google Maps API, as show in Fig 3. Fig 5. The Display of the Comparison of Financial Analysis of Each Group of Para-Rubber Plant s Species. Fig 3. The Display of the QFARM The QFARM system is a decision-making tool for Para-rubber plantation investment, based on NPV, BCR, and IRR. It compares the financial information, recommends the decision-making, and shows the financial details, as shown in Fig 4. Moreover, the QFARM shows the comparisons of financial analysis of each group of Para rubber plant s species and the recommendation of the best one in case of the same conditions, as shown in Fig 5, and displays the sensitivity analysis results in graphical form each condition. From the usability test using the questionnaire with a reliability value of 0.84, it was found that the overall result to user acceptance was at = 4.25, S.D. = 0.68, meaning that the users accepted the QFARM, accounted for 91% If considering in detail in descending order, it was found that 1) the recognition in the functionality of the QFARM was at = 4.33, S.D. = 0.57, accounted for 95% of acceptance, 2) the recognition of recognition in the effectiveness of the QFARM was at = 4.20, S.D. = 0.75, accounted for 90% of acceptance, 3) the recognition in the consistency of the QFARM was at = 3.80, S.D. = 0.98 accounted for 80% of acceptance, 4) the recognition in the architectural and visual clarity of the QFARM was at = 4.20, S.D. = 0.75, accounted for 80% of acceptance, 5) the recognition in the user reaction of the QFARM was at = 4.10, S.D. = 0.62, accounted for 85% of acceptance, and 6) the recognition in the usefulness of the QFARM was at = 5, meaning that the users accepted the QFARM 45

6 Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System with 100% of acceptance. This confirmed that the users accepted the QFARM in every perspective. V. CONCLUSIONS This paper presents the Quality Financial Analysis of Para-Rubber on Google-Maps Prototype System (QFARM) as a decisionmaking tool for Para-rubber plantation investment. The system allows the investors to make decisions on whether or not to invest on the plantation and helps the investors to avoid the loss of investment opportunity. For the further implementation, the QFARM will be developed into the mobile application. In addition, the Knowledge Base can be extended to incorporate the Para-rubber database of any country that is interested in the plantation investment. [8] Groppelli, A. A. and Nikbakht, E. Finance. 5 th ed., New York, USA: Barron s Educational Series, [9] Anannavee, N. and Longpradit, P. Para-rubber Quality Financial Analysis System Model. Naresuan Agriculture Journal, vol. 14, pp , Jan-June [10] Yaowapanee, W. Research Methods in Computer Technology. 2nd ed., Phetchaburi, Thailand: Phetchaburi Rajabhat University, [11] Khan, Z. A. and Adnan, M. Usability Evaluation of Web-based GIS Application: A Comparative Study of Google Maps and MapQuest. M. Sc. thesis, Blekinge Institute of Technology, Ronneby, Sweden, Jan REFERENCES (Arranged in the order of citation in the same fashion as the case of Footnotes.) [1] Maenmeun, S. The Future of Pararubber with Asian Economic Community. Para Rubber Bulletin, Vol. 1, pp. 7-16, Jan-Mar [2] Deming, W. E. Out of the Crisis. Massachusetts, USA: MIT Center for Advanced Engineering Study, [3] Chakravarty, S. K. Cost Accounting and Financial Management. 4ed., New Delhi, India: New Age International Publishers, [4] Piputsitee, C. Economics of Project Analysis. Bangkok, Thailand: Kasetsart University, [5] Higgins, R. C. Analysis for Financial Management. 8th ed., New York, USA: McGraw- Hill, [6] Brewer, P. C., Garrison, R. H., and Noreen, E. W. Introduction to Managerial Accounting. 4th ed., New York, USA: McGraw-Hill, [7] Garrison, R. H., Noreen, E. W., and Brewer, P. C. Managerial Accounting. 12th ed., New York. 46