What Every Engineer Should Know about Accounting and Finance  book cover
1st Edition

What Every Engineer Should Know about Accounting and Finance

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ISBN 9780824792718
Published October 20, 1994 by CRC Press
256 Pages

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Book Description

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.

Table of Contents




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


Recording Financial Information and Accounting Conventions

Double-Entry and the Accounting Equation

Types of Depreciation Methods


Analyzing Financial Statements

What and Why of Financial Statement Analysis

Horizontal and Vertical Analysis

Working with Financial Ratios

Is Ratio Analysis a Panacea?


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


Budgeting for Profit Planning

Types of Budgets


A Short-Cut Approach to Formulating the Budget

Zero-Base Budgeting


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



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


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


Relevant Costing in Nonroutine Decisions

Relevant Costs Defined

Types of Decisions

Utilizations of Scarce Resources


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?


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


How Taxes Affect Business Decisions Loc T. Nguyen

The Corporate Income Tax

Tax Strategies and Planning



Appendix: Interest Tables


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