Financial fundamentals for engineers : this book explains what engineers should be taught about money (but usually have to learn the hard way)

Engineering means thrifty use of resources (labour, power, and materials). Money is the common measure for these however engineers are rarely taught how the realities of finance and economics will impact on the engineering decisions they make. Financial Fundamentals for Engineers sets out to show how finance interacts with engineering and why it matters. Basic financial concepts - money, profit, cash-flow - are explained using real-life examples. Key steps in the engineering cycle, like winning tenders, managing projects and getting paid are all explained in the context of becoming profitable and staying solvent. In the same accessible style that has been so popular with his students, George Solt tells engineers how finance can keep the wheels of engineering turning - and equally how it can cause those wheels to come off with calamitous results. * Step-by-step introduction to finance, why it matters and how it interacts with engineering * Communicates dry concepts in a dynamic, lively way using real-life examples and anecdotes * Perfect for undergraduate and graduate students as well as newly qualified professional engineers Title page......Page 4 Copyright page......Page 5 Contents......Page 6 INTRODUCTION......Page 8 It’s all about money......Page 10 Where’s the technology?......Page 11 How do we build it?......Page 12 Summary......Page 13 A Brief History of Money......Page 14 Inflation......Page 16 Interest......Page 18 The Banks......Page 20 Summary......Page 21 Why measure it?......Page 23 Summary......Page 28 4 HOW THINGS CAN GO WRONG – 1......Page 29 Limited liability......Page 31 Private and public companies......Page 32 Who runs things?......Page 34 Share price......Page 35 Sumary......Page 37 What is it?......Page 38 What’s it for?......Page 39 Raising capital by selling shares......Page 41 Increasing the share capital......Page 42 Getting capital from loans......Page 43 Summary......Page 47 How the business works......Page 48 Planning for profit......Page 49 Overtrading......Page 51 Marginal selling......Page 52 Summary......Page 53 The need for working capital......Page 54 Summary......Page 57 What’s cash flow?......Page 58 What does this tell us?......Page 60 Progress payments......Page 63 Retentions......Page 65 Paying late......Page 66 Summary......Page 69 It’s an Agreement......Page 70 Tender documents......Page 72 Summary......Page 76 What’s a Condition?......Page 77 Model Forms......Page 78 Subcontracts......Page 79 Damages......Page 80 Disputes and Resolution......Page 83 Summary......Page 84 12 HOW THINGS CAN GO WRONG – 2......Page 85 Summary......Page 88 How does it work?......Page 90 Man-hours......Page 91 Summary......Page 93 Competition......Page 94 Making up the price......Page 95 Finalising the price......Page 98 Summary......Page 100 Tendering......Page 101 Not so simple......Page 103 Negotiated contracts......Page 105 Summary......Page 106 16 HOW THINGS CAN GO WRONG – 3......Page 107 Summary......Page 110 Traditional contracts......Page 111 Reimbursable Contracts......Page 112 A different approach......Page 114 PFI......Page 118 Summary......Page 119 What are Terms of Payment?......Page 120 Ownership......Page 121 Delivery......Page 122 Extras......Page 123 Summary......Page 124 19 HOW THINGS CAN GO WRONG – 4......Page 125 Summary......Page 127 What next?......Page 128 The Plan......Page 129 Summary......Page 133 How Procurement Department’s work......Page 134 Summary......Page 138 What’s the problem?......Page 139 Achieving the milestone......Page 140 Real and virtual money......Page 141 Bad payers......Page 143 Summary......Page 144 A Brief History of Engineering......Page 145 Consultant engineers......Page 148 Big consultants......Page 149 Small consultants......Page 151 Summary......Page 153 Choices......Page 155 What do these costs mean?......Page 156 Optimisation......Page 157 Summary......Page 159 Is it measurable?......Page 160 Utilisation......Page 161 Reliability......Page 163 Summary......Page 164 Engineering and risk......Page 165 Accidents will happen......Page 166 Safety law......Page 167 Risk assessment......Page 169 Summary......Page 170 What’s the difference?......Page 171 The challenge of R&D......Page 172 A cheaper way......Page 173 Summary......Page 175 Summary......Page 176 APPENDIX 1 – FINANCIAL ACCOUNTS......Page 177 Balance Sheet......Page 178 Depreciation......Page 180 Profit and Loss......Page 181 What’s a Critical Path?......Page 183 Network diagram......Page 184 Project cash flow......Page 187 Payback......Page 188 Amortisation......Page 189 Net Present Value......Page 190 Rate of Return......Page 191 GLOSSARY......Page 193 INDEX......Page 199 Financial Fundamentals for Engineers fills this gap. The book explains basic financial concepts - money, profit, cash-flow - using real events from the authors' professional careers. It not only teaches 'How to Get it Right' but also 'How Things go Wrong'. The authors spell out how engineers can stay solvent at all the key steps in the life of an engineering project, from winning the tender to getting paid for their work, and make a profit at the end. In the same entertaining and accessible style that has proved so popular with their students, George Solt and Richard Hill tell engineers how finance can keep the wheels of engineering turning - and equally how it can cause those wheels to come off with calamitous results. The authors intend to fill a gap in engineering education, both for students and young engineers, which is an understanding that engineering projects depend as much on financial matters as they do on technology.