1st Edition
What Every Engineer Should Know about Accounting and Finance
Presents the fundamental finance and accounting processes, methods, strategies and terminology necessary for engineers and engineering managers to interpret financial data properly - examining topics such as cost and break-even analysis, the time value of money, financial ratios and discounted cash flow techniques. The information is designed to enable engineers and project managers to prepare, appraise, evaluate and approve financial plans to accomplish specific departmental and company objectives.
Preface
Introduction
Accounting
Important Accounting and Finance Concepts
Basic Forms of Business Organization
Topics Covered in This Book
Understanding the Financial Statements
The Income Statement and Balance Sheet
The Statement of Cash Flows
Notes to Financial Statements
Conclusions
Recording Financial Information and Accounting Conventions
Double-Entry and the Accounting Equation
Types of Depreciation Methods
Conclusion
Analyzing Financial Statements
What and Why of Financial Statement Analysis
Horizontal and Vertical Analysis
Working with Financial Ratios
Is Ratio Analysis a Panacea?
Conclusion
Cost Concepts, Cost Behavior, and Cost Accounting
Cost Classification
Income Statements and Balance Sheets—Manufacturer
Analysis of Cost Behavior and Flexible Budgeting
The High-Low Method
Flexible Budgeting
Accumulation of Costs and Cost Accounting
Job Order Costing and Process Costing Compared
Job Order Costing
Process Costing
Conclusion
Budgeting for Profit Planning
Types of Budgets
Illustration
A Short-Cut Approach to Formulating the Budget
Zero-Base Budgeting
Conclusion
Cost Volume-Profit Analysis and Leverage
Questions Answered by CVP Analysis
Contribution Margin Concepts
Are You Breaking Even?
Graphical Approach in a Spreadsheet Format
Determination of Target Income Volume
Cash Break-Even Point
Impact of Income Taxes
Margin of Safety
Some Applications of CVP Analysis and What-If Analysis
Sales Mix Analysis
Cost-Volume-Revenue Analysis and Non-Profit Organizations
Assumptions Underlying Break-Even and CVP Analysis
Leverage
Conclusion
Responsibility Accounting and Cost Control Through Standard Costs
Responsibility Accounting and Responsibility Center
Standard Costs and Variance Analysis
General Model for Variance Analysis
Flexible Budgets and Performance Reports
Conclusion
Improving Divisional Performance
Rate of Return on Investment (ROI)
The Breakdown of ROI—Dupont Formula
Residual Income (RI)
Investment Decisions Under ROI and RI
Transfer Pricing
Conclusion
Relevant Costing in Nonroutine Decisions
Relevant Costs Defined
Types of Decisions
Utilizations of Scarce Resources
Conclusion
Applying the Time Value of Money
How Do You Calculate Future Values—How Many Grows
What Is Present Value—How Much Is the Money Worth Now?
What Are the Applications of Future Values and Present Values?
Conclusion
Evaluating Capital Expenditure Projects
What Are the Types of Investment Projects?
What Are the Features of Investment Projects?
How Do You Measure Investment Worth?
How to Select the Best Mix of Projects with a Limited Budget
How to Handle Mutually Exclusive Investments
Lease-Purchase Decision
How Do Income Taxes Affect Investment Decisions?
How Does MACRS Affect Investment Decisions?
What to Know About the Cost of Capital
Conclusion
How Taxes Affect Business Decisions Loc T. Nguyen
The Corporate Income Tax
Tax Strategies and Planning
Conclusion
Glossary
Appendix: Interest Tables
Index
Biography
Jae K. Shim, Norman Henteleff