49098 Engineering Financial Control
Warning: The information on this page is indicative. The subject outline for a particular semester, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.
UTS: Engineering: Systems, Management and LeadershipCredit points: 6 cp
Subject level:
Postgraduate
Result type: Grade and marksThere are course requisites for this subject. See access conditions.
Handbook description
This subject introduces students to the basics of accounting and financial transactions. The subject is practice based and the transaction section is assessed by input accounting entries into the MYOB accounting system. Financial statements are then examined in detail and the process of accounting for equity and assets is explained. Ratio, breakeven and sensitivity analyses are performed on companies' financial statements to determine how well the businesses are performing. A budgeted project plan is prepared and costed as part of the assessment and the working capital cycle is explored. Microsoft Project is used for the project budgeting assignment. Financial mathematics and discounted cash flow techniques are used to assess projects and investment decisions. Debt and equity from angels, venture capitalists, banks and informal investors are outlined as potential sources of funding for new projects and opportunities.
Subject objectives/outcomes
On successful completion of this subject students should be able to:
- Embrace the accounting process and conduct transactions through an accounting system.
- Produce an income statement, balance sheet and cash flow statement.
- Distinguish between various methods of costing projects and operations
- Prepare operating, capital budgets and a financial plan
- Analyse financial statements to determine the health of a company.
- Identify problems in accounts receivable, inventory and accounts payable operating activities
- Conduct a discounted cash flow analysis to make investment decisions
- Correctly structure the financing decisions and identify the best sources of finance
Contribution to course aims and graduate attributes
Students in this subject will use an accounting system, project management tool, and a financial planning system. This will develop their ability to make financial decisions (B.4) and research industries (B.6). Students will need to assure that they can work effectively in a team and communicate to external clients (E.1) by preparing the financial plan (B.3).
This subject contributes to the following graduate attributes: A.1. Identify, interpret and analyse stakeholder needs, B.4. Decision making, C.1. Apply abstraction, C.3. Evaluate model, E.1. Communicate effectively, E.2. Work in team and E.3. Apply project management.
A complete list and description of graduate attributes for the faculty of Engineering and Information Technology can be found at http://feit.uts.edu.au/faculty/graduate-attributes.html
Teaching and learning strategies
The format of the subject will be weekly 3 hour lectures presenting financial theory together with 25 case studies
to demonstrate the application of the theory. The lectures will closely follow the textbook and should be
supplemented by further readings. These topics require students to read the prescribed textbook and to actively
participate in class discussions. There is an emphasis on self directed learning through project based work.
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Content
Accounting
• Understand basic accounting concepts and terminology.
• How to have a jargon free, meaningful conversation with your accountant.
• Learn the principles of the double entry bookkeeping system.
• Understand the process of identifying, measuring, recording and communicating financial information.
• Recognise the difference between management accounting and financial accounting reports.
• Classify assets, liabilities, equity, revenue and expenses.
• Record journal transactions manually in preparation for entry into the accounting system.
• Understand the process of preparing financial statements.
• Within 2 hours you will have prepared a profit & loss and balance sheet.
• Case Study - Bathroom Renovator.
Financial Transactions
• Create a new company file in the MYOB accounting system.
• Establish a chart of accounts for your business and enter opening balances.
• Create customer and supplier files with credit terms.
• Set up inventory items and opening balances.
• Record financial transactions in the ledger accounts.
• Understand how to record all the basic accounting transactions.
• Make sales, issue customer invoices and collect debts.
• Create purchase orders and make supplier payments.
• Learn how to automate recurring transactions.
• Reconcile MYOB’s cheque account against the bank statement.
• Prepare a trial balance, profit and loss statement and balance sheet.
• Record GST on purchase and sale transactions.
• Prepare a Business Activity Statement for reporting GST.
Financial Adjustments
• Understand the difference between cash and accrual accounting.
• Recognise the difference between cash flow and profit.
• Make end of period adjustments in the MYOB accounting system.
• Account for and record prepaid expenses.
• Receive customer payments for work yet to be completed.
• Calculate and record accrued expenses such as wages payable.
• Apply depreciation against assets.
• Close the books at the end of the period.
Profit & Loss Statement
• Examine different revenue models.
• Conduct all selling transactions including making sales, returns and giving discounts.
• Perform all buying transactions including making purchases, returns and receiving discounts.
• Group revenue and expenses into categories that can be controlled.
• Apply 3 different depreciation methods to assets.
• Understand what is in the operating and abnormal sections of the profit and loss statement.
• Case Study – eBay, there is no accounting for a good buy.
Balance Sheet
Assets
• Classify current and non-current assets.
• Account for bad and doubtful debts.
• Understand how non-current assets are recorded in an accounting system.
• Perform transactions to revalue, sell and scrap non-current assets.
• Learn how to value intellectual property and intangible assets.
• Determine which intangible assets can appear in the balance sheet?
• Account for goodwill when purchasing a company.
Liabilities
• Classify contingent, current and non-current liabilities.
• Account for provisions, warranties and employee benefits.
Equity
• Prepare accounts for sole traders, partnerships and companies.
• Choose the correct ownership structure for your organisation.
• Compare the cost and tax effectiveness of sole traders, partnerships and companies.
• Account for company shares and issuing dividends.
Case Study – Facebook, the public face of share issues.
Project Budgeting
• Prepare cost estimates costs for projects.
• Develop project contingencies.
• Use Microsoft Project to create a project schedule and establish a cost baseline.
• Load activities, resources and costs into a project plan.
• Establish a critical path and develop alternate crashing scenarios.
• Use resource levelling to balance resource bottlenecks.
• Calculate the planned value, earned value and actual cost of the project.
• Understand the difference between the schedule and cost variance.
• Case Study – Project Preparation – Aircraft scheduling.
Company Budgeting
• Prepare operating, cash and capital budgets.
• Set objectives and translate these into key performance indicators.
• Understand the cash flow statement.
• Classify operating, investing and financing activities for the cash flow statement.
• Learn how to prepare a cash flow statement using direct and indirect methods.
• Use budgets to measure performance and control variances.
• Create revenue, cost, profit and investment centres.
• Compare departmental budgets using contribution margin.
• Case Study – Budget Preparation – Bridge Test.
• Case Study – Budget Preparation – Civil Contracting company.
• Case Study – Budget Preparation – Materials Handling company.
• Case Study – Budget Preparation – Software Testing company.
Annual report
• How to read an annual report and notes to the financial statements.
• What is provided in the director’s report and auditor’s report?
• A step-by step method for reviewing financial statements to determine the health of an organisation is provided.
• Improve your ability to detect the signs of deteriorating financial performance and implement corrective actions.
Financial Ratio Analysis
• Perform a horizontal and vertical ratio analysis.
• Calculate your liquidity, efficiency, profitability, solvency and investment financial ratios.
• Analyse the trend in financial ratios for an organisation.
• Compare different organisations using financial ratios.
• Benchmark your organisation against industry financial ratios.
• Be able to identify a financially unsound company well ahead of a crisis.
• Case Study - Operating Ratio Analysis – Construction companies.
• Case Study - Investing Ratio Analysis – Priceline.com.
• Case Study - Bridge Test strength analysis.
Breakeven Analysis
• Prepare and use a breakeven analysis for your business.
• How unit volume, price and costs affect profit.
• Learn about the power of operating leverage.
• Calculate the bottom line impact based on unit sales volume.
• Examine the break even impact on a service company.
• Apply the breakeven model to a multi-product business.
• Use breakeven to make preliminary facility location and investment decisions.
• Analyse outsourcing decisions using breakeven modelling,
• Case Study - Breakeven Analysis – T Shirt Wholesaler.
• Case Study - Breakeven Analysis – Payroll company.
• Case Study - Breakeven Analysis – Retail Yachting company.
• Case Study - Breakeven Analysis – Airfreight company.
Turnarounds
• Understand the factors contributing to business failure.
• Employ strategies to plug the blood loss and turn the company around.
• A cash management tool is used to demonstrate how growth can send a company broke.
• Using efficiency, profitability and solvency ratios to prevent overtrading.
• Identify corrective actions to address a cash crisis.
• Case Study – Nokia, turning on communications.
• Case Study – Dataflow, lose control of your current assets, lose your business.
• Case Study - Turnarounds – Sporting Apparel company.
Cash Flow Statement Analysis
• Analyse the cash flow statement to reveal the financial health of the organisation.
• The cash flow statement shows what the income statement hides.
• Case Study – Cash Flow Analysis – Insurance company.
Operating Activities
• How to control cash and detect fraud.
• Setting credit limits and providing customers’ lines of credit.
• A step-by-step process for collecting debts is provided.
• The mechanics of the periodic and perpetual inventory systems are examined.
• Calculate the cost of inventory using the Specific Identification, FIFO, LIFO, Moving Average and Weighted Average inventory costing methods.
• Explore inventory systems for wholesale, retail and manufacturing organisations.
• How to control the purchasing and accounts payable functions to minimise fraud.
• The advantages and disadvantages of using restrictive and flexible working capital policies are examined.
• Determine the amount of cash that is tied up in working capital.
• Case Study – One.Tel, going from nothing to $ 5.3 billion and back to nothing.
Investing Activities
• How to make investment decisions using discounted cash flow techniques.
• Determine to net present value and internal rate of return for an investment.
• Conduct a crossover analysis to compare investments.
• Use differential analysis and the net present value index to select competing investments.
• Calculate the repayments for a mortgage.
• Prepare a cost benefit analysis for competing projects.
• Calculate the payback period of an investment.
• Examine the techniques for valuing a company.
• What to look for when buying a company.
• Case Study – RFID Tag, valuing a start-up company.
• Case Study - Mining Coal – Selling a company.
• Case Study – Restaurant Franchise, building a franchise company.
Financing Activities
• The sources of finance for new and established businesses are identified.
• Where the top 500 fastest growing companies got their start-up capital.
• Structuring funding to suit the business.
• Which funding is preferred, debt or equity?
• Sources of short-term debt finance are examined: overdraft, credit cards, trade finance, commercial bills, factoring and inventory financing.
• Sources of long-term debt finance are explored: bank term loans, operating leases, finance leases, mortgages and debentures.
• What do banks look when risk profiling and assessing security?
• Sources of equity finance are examined: personal savings, angel investors, venture capitalists, private equity investors and strategic partners.
• Understand how angels and private equity investors value your business.
• The process and costs for listing on the stock markets is explained.
• How to exit a business and maximise value.
• Case Study – Liquid Paper, correcting funding mistakes.
• Case Study – Microsoft, press 'start' for funding.
• Case Study – Virgin, investing in a diversified portfolio.
• Case Study – Google, searching for funding.
Assessment
Assessment Item 1: Individual Accounting Transaction Assignment
| Intent: | Financial transactions for a new business will be entered into an accounting system to provide students with an insight into running a company. Financial statements will be created at the end of each month to review the financial performance of the company. |
| Objective(s): | (Objectives 1,2) (Attributes A1, B1, B3, E1) |
| Weighting: | 40 |
| Length: | MYOB Transaction File: 6 months of Income Statements and Balance Sheets (equivalent to 12 pages). |
| Criteria: | • Financial transactions for 6 months are identified, interpreted and analysed with a business owner’s perspective, (1) (A.1) |
Assessment Item 2: Group Financial Plan
| Intent: | The financial plan is developed as part of an integrated business plan requiring the student to interface with marketing, operations and personnel areas of the company and work with other students in a team to construct the financial plan. The financial budgets are entered into a financial planning system to produced forecast financial statements. The statements must be analysed and conclusions drawn about whether the plan is realistic and can be executed. The companies financial indicators should be benchmarked against industry standards. |
| Objective(s): | (Objectives 2,4,5,7,8) (Attributes A1, A2, A3, A5, B1, B2, B3, B4, B5, B6, C1, C2, C3, E1, E2) |
| Weighting: | 30 |
| Length: | Maximum length 15 pages. |
| Criteria: | • A Financial operating and capital budget is prepared for a company including pro-forma income statements, balance sheets and cash flow statements, (2) (E.1) |
Assessment Item 3: Examination
| Intent: | The entire subject content is assessed in the examination. The multiple choice questions are intended to test students understanding of the subject material and perform financial calculations to determine the correct answers. |
| Objective(s): | (Objectives1,2,3,4,5,6,7,8) (Attributes A.5, B.1, B.3, C.1) |
| Weighting: | 30 |
| Length: | 40 Mulitple Choice Questions |
Minimum requirements
In order to pass the subject you must earn a total of 50 marks for this subject. You do not need to pass all 4 assessment components but the overall mark must be at least 50%.
Recommended texts
Entreact Program, Financial Control, Version 5.1, P.Pastars, 2013. The textbook includes online access to around 340 multiple choice questions for the semester.
OR
Accounting in Australia, 8th Edition, J. Hoggett, L. Edwards, J. Medlin, John Wiley & Sons Australia, 2012.
OR
Engineering Financial Control Lecture Support Notes, 2013 (This text is a summarised version of the subject containing approx. 15% of the content presented).
References
- Construction Accounting and Financial Management, Steven J. Peterson Upper Saddle River, N.J.: Prentice Hall, c2005.
- Financial and Economic Analysis for Engineering & Technology Management, Henry E. Riggs. Hoboken, N.J.: Wiley, 2004.
- Building Financial Model: A Guide To Creating And Interpreting Financial Statements, John S. Tjia. New York: McGraw-Hill, c2004.
- Watching The Bottom Line: How To Master The Essential Techniques For Managing Small Business Finances, John Whiteley. Oxford: How To Books, 2004.
- Finance and Accounting For Nonfinancial Managers: All The Basics You Need To Know, William G. Droms. Reading, Mass.; Oxford: Perseus, 2003.
- Australian Financial Accounting, Craig Deegan. Sydney: McGraw-Hill, 2005.
- Management Accounting: an Australian perspective, Kim Langfield-Smith, Helen Thorne, Ronald W. Hilton. Sydney: McGraw-Hill, 2003.
- Introductory Computer Accounting: A Live Data Approach; MYOB Accounting, Accounting v13 C. J. Cheetham, J. D. Ring. Milton, Qld.: John Wiley, c2004.
- MYOB A Hands On Approach, Version 13 Mark Vallely. Frenchs Forest, N.S.W.: Pearson Education Australia, 2004.
Other resources
