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
SABER C-1200
SABER C-2200
SABER C-800TT
SABER C-1200TT
SABER C-1200TT
SABER C-1200TT
SABER C-1200TT
SABER RB-550
SABER WIDE BELT C-1200
SABER WIDE BELT
SABER WIDE BELT
SABER CVF-1200
SABER WIDE MACHINE
SABER WIDE MACHINE
SABER WIDE BELT C-1200
Finance and Accoutning
for
Engineers
MT 251
Vanderbilt University
School of Engineering
David A. Berezov, CPA MBA
Adjunct Professor of Management of
Technology
Course Description
Topics are studied from the perspective of
Engineering Professionals working in
business organizations
Topics Covered
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Time Value of Money
Capital Budgeting
Capital Formation
Financial Accounting and Reporting
Performance Measurements
Working Capital Management
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
• 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 ?
• 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
• Engineering calculators; Sin, Cos, Tan, Pi, Log,
Deg, Rad
• Financial Calculators:
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•
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•
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PV – Present Value
FV – future value
IRR – Internal rate of return
PMT – Payment
I – Interest rate
Finance and Accounting for
Engineers views individual
projects and businesses as
though they were machines.
Simple
Business 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.
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.
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.
After 3 years:
FV3 = PV(1 + i)3
= $100(1.10)3
= $133.10.
In general,
FVn = PV(1 + i)n.
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
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
• Debt Capital
• Equity Capital
• Cost of Capital
• Financial Leverage
Financings
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Corporate Bond issues
Municipal Bond Issues
Preferred Stock Issues
Common Stock Loans
IPO’s
Construction Loans
Working Capital Loans
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
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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
• Information on firms interviewing students
 Annual Reports
 SEC From 10K
 Proxy Statements
Statistics
Employer Firms
Total
# Firms
5.6M
# Emp. 110.7M
Receipts $18.2T
# Employees
<500
500+
5.6M
55.7M
$7.5T
16.7K
55.0M
$10.7T