Summary of Section 2.3.2

Section 2.3.2 deals with two influence charts of one individual tax income statement. The first chart diagrams the tax income statement in a present day view. The diagram is not a model because it cannot be used to determine outcomes long-term. For example the variable Sales is fixed. Because this variable is fixed it cannot be manipulated to work for future numbers. Cost of Goods is also a fixed variable that similar to Sales must be manipulated to have any use beyond the present numbers. Therefore the problem arises and a need for another influence chart emerges. The problem is to create a chart that would allow predictions for later dates. This model is presented in Figure 2.5. Figure 2.5 contains that changes needed to the previous influence chart. These changes are primarily making Sales Revenue and Cost of Goods regular variables (not fixed variables). As a result each variable is broken down into the fixed variables that influence them. Price influences Sales Revenue and is a fixed variable. Units Cost (a fixed variable) influences Cost of Goods. Lastly the variable Quantity Sold is added to the chart with the variables Initial Sales and Sales Growth influencing it.