1st Edition

What Every Engineer Should Know about Accounting and Finance

By Phillip A. Laplante, Jae K. Shim Copyright 1995

    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