Financial system

This article is a stub.

File:FinanceLogo1.jpg

After reading this page:

• you've learned what a financial system is
• you've learned what role the financial system plays in the Tygron Engine
• you've learned about the elements of the financial system in the Tygron Engine
• you've learned how to adjust the financial system in the Tygron Engine

Financial System

From Wikipedia, the free encyclopedia

In finance, the financial system is the system that allows the transfer of money between savers (and investors) and borrowers. A financial system can operate on a global, regional or firm specific level. Gurusamy, writing in Financial Services and Systems has described it as comprising "a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions."

According to Franklin Allen and Douglas Gale in Comparing Financial Systems:

Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow inter-temporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely.

Financial systems depend on the countries viewpoint on freedom of trade. Some countries i.e. The Soviet Union had socialist financial systems because they value centralized organized state funded trading rather than freedom of trade by everyone.

The Financial System in the Tygron Engine

The Financial System in the Tygron Engine is the total system of costs and income. It is the system that allows money transfers between the different (playable and non-playable) stakeholders and the facilitator. Players and the facilitator can transfer money in game to each other in order to negotiate. The system enables land transactions, and the granting of subsidies and loans. The system also takes extra costs, such as buy out fees when demolishing non-vacant structures, into consideration. The financial system in the Tygron Engine uses default values and calculations. However, by customizing these values, the financial system can be tailored to use specific financial data that a user might have at his disposal.

Elements of the Financial System in the Tygron Engine

The financial system in the Tygron Engine consists of certain basic elements. These elements can be divided over two distinct groups: costs and income. The effect of these elements is depicted per stakeholder in their budget indicator.

Costs

From Wikipedia, the free encyclopedia

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquiring party over and above the price paid to the producer. Usually, the price also includes a mark-up for profit over the cost of production.

More generalized in the field of economics, cost is a metric that is totalling up as a result of a process or as a differential for the result of a decision. Hence cost is the metric used in the standard modelling paradigm applied to economic processes.

In the Tygron Engine costs are generated as follows:

Construction costs

Construction costs refer to the value of money that has been used up to build a construction in the Tygron Engine. Also the costs for terrain adjustments, such as lowering and raising the terrain, or changing the terrain behaviour, are referred to as Construction Costs.

Demolition costs

Demolition costs refer to the value of money that has been used up to demolish an already existing construction in the Tygron Engine.

Land Price when buying

The land price when buying reflect the purchase costs per measurement. This is a default value, however, this value is open for change during the negotiation process between the involved stakeholders.

Buy out costs

When demolishing a construction in the Tygron Engine during game play, the associated costs can be considerable higher when the building is not vacant. These extra costs are the buy out fee that needs to be paid to the occupants for their relocation. In general it is cheaper to demolish vacant buildings, without the need for such a buy out fee.

Interest (loan costs)

When a player is granted a (bank) loan, the calculated interest will be taken into account as costs.

Income

From Wikipedia, the free encyclopedia

Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time."

In the field of public economics, the term may refer to the accumulation of both monetary and non-monetary consumption ability, with the former (monetary) being used as a proxy for total income.

In the Tygron Engine, income refers to the incoming money flow per stakeholder. Income can be generated from the following sources:

Income from constructions (rent)

When a construction, such as an apartment block, is finished, the object will start generating income for the owner.

Land price when selling

Selling an object will generate income in the form of sales income. Even extreme low price settings will generate income. This does not mean that the income generates profit automatically, as that depends on prior costs before the transaction. For example, selling a piece of land for a low price of 1 Euro per square meter, when previously a construction was demolished there for 10.000 Euro per square meter, will generate income, however, there will be a negative profit margin (loss) left over after the sale.

Subsidies

Subsidies are a form of income where one party grants a sum of money to another party, often with special conditions. A municipality can grant a subsidy to a project developer for a certain project, under condition that the developer uses the subsidy to construct extra green roofs, parking lots, water storage, etc. Subsidies are considered regular income in the Tygron Engine.

(Bank) Loans

A special form of income are (bank) loans. According to the definition, loans do increase the budget (= monetary consumption ability) available for the borrowing stakeholder. However, loans are subtracted from the lenders capital. In case the stakeholder has a bigger loan that actual capital, the stakeholder will not be able to score at all (in the total score). It is also worth considering that borrowing money costs money (interest), which is a cost (See also Interest (loan costs))

Adjusting the Financial System in the Tygron Engine

In order to incorporate custom financial data, default values used in the Tygron Engine can be adjusted accordingly. Most of these values can be changed in the Function Value panel, which is located under the Indicators menu in the Editor. For more information about function values - for example how to add functions or add different categories to functions - see also the main article about functions.

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  Function Values panel

Adjusting construction costs

The Constructions Costs can be adjusted in the Function Value panel. These costs are displayed in an amount of money x 1,000/ surface unit. Currency and measurement units depend on the selected region (localization) of the game.

Adjusting demolition costs

The Demolition Costs can be adjusted in the Function Value panel. These costs are displayed in an amount of money x 1,000/ surface unit. Currency and measurement units depend on the selected region (localization) of the game.

Adjusting income generated by constructing

When a structure is constructed, an amount of money becomes available for the stakeholder that constructed it. This income is called the 'Sell Price' and can be adjusted in the Function value panel for each function. This 'Sell Price' also refers to the income generated on rental objects, such as constructions by housing corporations. The rent income is calculated over the economical lifespan of an object and the total is then added as one amount to the budget of the stakeholder upon completion of the project.