Analysis of micro-effects of macroeconomic variables on firm profit by system dynamics method (Case study of Taban Hoor Energy Management Company)

Purpose: The net profit in economic enterprises is the result of financial and economic investment activities. These activities may be affected by internal and external environmental factors. In this research, the effect of macroeconomic variables on the profitability of Omid Taban Energy Management Company, as one of the large and active companies in the country's energy industry, has been investigated based on the company's financial statements from 2017 to 2021. This is done with the system dynamics method. Firstly, we present the current state of the variables of the economic environment of companies in the field of electricity industry, the theoretical foundations and the literature on the analysis of the profit mechanism of the economic company as well as the methodology of system dynamics. After that, the system dynamics model of the company's profitability is simulated in a basic scenario with the continuation of the existing situation and under several other scenarios. The method of system dynamics proposed by Forster is used, and the model presented in the ithink software is simulated, thus examining the possibility of using the concept of system dynamics in the financial system and modeling a real scenario.
Methodology: In this research, the basics of the dynamics method have been matched with the principles of accounting, in addition to providing a new model for financial events. The capabilities of the proposed research method can be used for modeling and simulating financial processes. In this section, the simultaneous modeling of the cost and revenue parts of the company and their effects on each other are discussed. Finally, with the help of the dynamic model in an integrated and dynamic manner and by considering scenarios for exogenous variables, the effects of macro variables on the profit function of the company are evaluated. The model of the company's dynamic system profitability developed in this research consists of five independent and interrelated parts. They include net profit, assets, liabilities and obligations, macroeconomic variables and financial ratios.
Results and discussion: The simulation of the model in the basic state shows that, according to the items listed in the company's profit and the loss statement in 2015, the company's net profit is equal to 809,448 million Rials and about 11,299,897 million Rials in 2014. Also, by applying a 10% inflation shock in the economy, the net profit will reach 16,160,970 million Rials. According to the results, assuming a 10% gas price shock, the net profit in 2021 was 11,167,581 million. With a 10% electricity price shock, the net profit was equal to 15,217,118 million Rials. Assuming a 10% energy price shock, the net profit in 2021 would be 14,092,176 million Rials. Therefore, it can be concluded that, with the increase in the price of energy, the increase in the company's income due to the increase in the price of electricity is greater than the increase in the cost of electricity production due to the increase in the price of gas. As a result, the profit of the company increases. In general, according to the modeling done, among the investigated variables, inflation seems to has had a more positive effect on the profitability of Omid Tabanhor Energy Management Company than the other variables because the rate of return on the company's assets grows more than the company's expenses.
Conclusions and policy implications: The results of the study showed that inflation and the increase in energy prices have a positive relationship with the profitability of the company, but the exchange rate has no significant relationship. Also, the results of the simulation of the key variables of the study showed that the proposed method, i.e. modeling financial operations based on a dynamic approach, can help managers to analyze the effect of variables based on behavioral patterns by simulating the trend of variables in future periods. It can also achieve useful information by simulating behavior financial variables in the future.