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Finance and Accoutning for Engineers MT 251 Vanderbilt University School of Engineering David A. Berezov, CPA MBA Adjunct Professor of Management of Technology Saber Industries, Inc. David A. Berezov President SABER C-250 SABER C-250 SABER C-550 SABER C-550 SABER C-550 SABER C-1200

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finance and accoutning for engineers
Finance and AccoutningforEngineers

MT 251

Vanderbilt University

School of Engineering

David A. Berezov, CPA MBA

Adjunct Professor of Management of Technology

slide4
Saber Industries, Inc.

David A. Berezov

President

finance and accoutning for engineers32
Finance and AccoutningforEngineers

MT 251

Vanderbilt University

School of Engineering

David A. Berezov, CPA MBA

Adjunct Professor of Management of Technology

course description
Course Description

Topics are studied from the perspective of Engineering Professionals working in business organizations

topics covered
Topics Covered
  • Time Value of Money
  • Capital Budgeting
  • Capital Formation
  • Financial Accounting and Reporting
  • Performance Measurements
  • Working Capital Management
course objectives
Course Objectives
  • Develop an understanding of what is required for an otherwise successful engineering project to be considered a financial success.
  • Develop an understanding of what is required for business enterprises undertaking such projects to be considered financially successful.
the problem
The Problem
  • Why do some finance and accounting managers say, “ The Engineers just don’t get it” ?
  • Why do some engineers refer to business skills as “Soft Skills”?
a question of context
A Question of Context ?
  • The Value “111”, is it “one hundred eleven”, “seven” or “two hundred seventy three”
  • (decimal, binary or hex)
  • We shipped $12,000 product this month and collected payments of $8,000, What are our “Sales” for the month, $12,000 or $8,000 ?
  • (“accrual” method or “cash” method )
even the hand calculators are loaded with different functions
Even the hand calculators are loaded with different functions
  • Engineering calculators; Sin, Cos, Tan, Pi, Log, Deg, Rad
  • Financial Calculators:
      • PV – Present Value
      • FV – future value
      • IRR – Internal rate of return
      • PMT – Payment
      • I – Interest rate
slide39
Finance and Accounting for Engineers views individual projects and businesses as though they were machines.
simple business machines
SimpleBusiness Machines

Projects are viewed as machines fueled by capital, operated over time and producing a measurable output. We start with the time value of money as applied to simple cash flows including future sums, annuities and perpetuities. We then investigate the more complex cash flows engineered in the capital budgeting process, and introduce the element of risk.

slide41

What’s the FV of an initial $100 after 3 years if i = 10%?

0

1

2

3

10%

100

FV = ?

Finding FVs (moving to the right

on a time line) is called compounding.

slide42

After 1 year:

FV1 = PV + INT1 = PV + PV (i)

= PV(1 + i)

= $100(1.10)

= $110.00.

After 2 years:

FV2 = PV(1 + i)2

= $100(1.10)2

= $121.00.

slide43

After 3 years:

FV3 = PV(1 + i)3

= $100(1.10)3

= $133.10.

In general,

FVn = PV(1 + i)n.

complex machines
Complex Machines
  • Simple cash flows are expanded to complex business enterprises. We review the basics of financial accounting and reporting with the goal of teaching the engineer the language of the financial community. With the terminology in hand, we look at inventory and its relation to product development activities
performance measurements
Performance Measurements

We then look at performance measurements for business enterprises; with the goal of learning what is normal, extraordinary and troublesome for various types of businesses.

capital fuel for financial machines
Capital Fuel For Financial Machines
  • Debt Capital
  • Equity Capital
  • Cost of Capital
  • Financial Leverage
financings
Financings
  • Corporate Bond issues
  • Municipal Bond Issues
  • Preferred Stock Issues
  • Common Stock Loans
  • IPO’s
  • Construction Loans
  • Working Capital Loans
working capital
Working Capital

We examine the day to day aspects of working capital management. The objective is to understand how business growth and contraction affect the firm’s cash position.

taxation
Taxation
  • Federal Corporate Income Taxation
  • Federal Personal Income Taxation
  • Federal Estate and Gift Taxation
  • State Income Taxation
  • Local and State Business Taxes
    • Sales taxes
    • Property taxes
    • Personalty Taxes
informed interviewees
Informed Interviewees
  • Information on firms interviewing students
    • Annual Reports
    • SEC From 10K
    • Proxy Statements
statistics employer firms
StatisticsEmployer Firms

# Employees

Total <500 500+

# Firms 5.6M 5.6M 16.7K

# Emp. 110.7M 55.7M 55.0M

Receipts $18.2T $7.5T $10.7T