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Page viii - Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most . QUALITY CERTIFICATE. This is to certify that the e-course material. Subject Code: MG Subject.: Engineering Economics and Financial Accounting. Class. mg engineering economics financial accounting. 22EF45B5F91E9F0D5FDD. Recognizing the pretentiousness ways to acquire this ebook.

Engineering Economics And Financial Accounting Ebook

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The book will be particularly suitable for courses in Managerial Economics and Financial Accounting as part of an engineering degree education at. EPUB Ebook here { pixia-club.info }. . Engineering Economics & Financial Accountingment Ee&fa July ; 3. . ACCOUNTANCY Accountant provides accounting information relating to cost, revenues. UNIT I-MGEngineering Economics and Financial Accounting Notes - Free download as PDF File .pdf), Text File .txt) or read online for free.

There may be fluctuations specific to the industry, which are least as uncertain and may not always coincide with those of the overall market. Competition risks: These are the risk arising from the policy changes of the rivals, which include things like changes in prices, product line, advertisement expenditure, etc.

Risk of technological change: This is also called the risk of obsolescence, which grows with advancement of an economy. These risks arise from the possibility of newly installed machinery becoming obsolete with the discovery of new and more economical process of production. Risk of taste fluctuation: In many cases, vagaries of consumer demand create uncertain conditions. Successful product of one season may become discarded in the next season. These risks are most common in fashion and entertainment industries.

Page 14 of 18 Unit- I. Risk of cost fluctuation: Unless contractually agreed upon, the future prices of labour, material etc. Thus estimates of future expenditure are subject to uncertainty.

Risk of public policy: Government policy regarding business undergoes a change over time, some of which cannot be precisely predicted. These relate to price control, foreign trade policy, corporate taxation etc.

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A decision-maker is risk-neutral if each added rupee of wealth gives him the same additional utility. A decision-maker is considered risk-averse if addition of each successive rupee to his wealth gives him lesser utility than the earlier rupee. A decision-maker is considered as risk-preferrer when addition of each successive rupee to decision-makers wealth gives him greater utility each time.

Selection process: Decision making is a selection process. The best alternative is selected out of many available alternatives.

Goal-oriented process: Decision making is goal-oriented process. Decisions are made to achieve some goal or objective. End process: Decision making is the end process. It is preceded by detailed discussion and selection of alternatives. Human and Rational process: Decision making is a human and rational process involving the application of intellectual abilities. It involves deep thinking and foreseeing things. Dynamic process: Decision making is a dynamic process.

An individual takes a number of decisions each day. Decision making is situational. A particular problem may have different decisions at different times, depending upon the situation. Continues or Ongoing process: Decision making is a continuous or ongoing process. Managers have to take a series of decisions on particular problems. Freedom to the decision makers: Decision making implies freedom to the decision makers regarding the final choice.

It also involves the using of resources in specified ways. Positive or Negative: Decision may be positive or negative. A decision may direct others to do or not to do. Gives happiness to an Endeavour: Decision making gives happiness to an Endeavour who takes various steps to collect all the information which is likely to affect decisions. Identification of problem: Decision making process begins with the identification of problem that means recognition of a problem.

The managers have to use imagination, experience, and judgment in order to identify the real nature of the problem. Diagnosis and analysis of the problem: In order to diagnose the problem correctly, a manager must obtain all pertinent facts and analyze them correctly. The most important part of the diagnosing problem is to find out the real cause or source of the problem.

After analyzing the problem next phase of the decision making is to analyze problem. This process involves classifying the problem and gathering information.

Search for alternatives: A problem can be solved in many ways. All possible ways cannot be equally satisfying. Managers are advice to limit him to the discovery of the alternatives which are strategic or critical to the problem. The principle of limiting factor is given as By recognizing and overcoming that factor that stand critically in the way of a goal, the best alternative course of action can be selected. Creative thinking is necessary to develop alternatives such as decision makers past experience, practices followed by others, and using creative techniques.

Evaluation of alternatives: Evaluation is the process of measuring the positive and negative consequences of each alternative.

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Some alternatives offer maximum benefit than others. An alternative is compared with the others. Management must set some criteria against which the alternatives can be evaluated. Selecting an alternative: In this stage, decision makers can select the best alternatives.

Optimum alternative is one which maximizes the results under given conditions. Implementation and follow-up: Once an alternative is selected, it is put into action in systematic way. The future course of action is scheduled on the basis of selected alternatives. When a decision is put into action, it may yield certain results.

These results provide the indication whether decision making and its implementation is proper. The follow-up action should be in the light of feedback received from the results. The concept of rationality is defined in terms of objective and intelligent action. Major and supplementary decisions: Major decisions refer to the decisions with regard to the quality of the product, price of the product, developing a new product etc.

These decisions have direct bearing on the achievement of the goals of the concern and so these decisions should be made Page 16 of 18 Unit- I.

Economics, Econometrics and Finance

Minor or supplementary decisions, on the other hand, are made in the course of conversion of major decisions into action. Organizational and personal decision: Organizational decisions are made by the executive in his capacity as manager in order to achieve the best interests of the organization. These decisions can be delegated to the other members in the organization. Personal decisions, on the other hand, are made by the manager in his personal capacity and not in his capacity as a member of the organization.

These decisions are not delegated. These decisions relate to the executives personal work. Basic and routine decisions: Basic decisions involve long range commitment and large funds.

Decisions with regard to selection of a location, selection of a product line, merger of the business are known as basic decisions. As these decisions affect the entire organization, they are considered as basic decisions. They are also now as vital decisions. Decisions that are taken to carry out the day-today activities are called routine decisions. These decisions are repetitive in nature.

They have only a minor impact on the business. These decisions are made at middle and lower levels of management. For eg. Group and individual decisions: If the decision is taken by one person, it is called individual decision.

Group decisions are taken by a group of persons. Policy and operating decisions: Policy decisions are made at top management levels. These decisions are taken to determine the basic policies and goals of the organization. Operating decisions are taken to execute the policy decisions. These decisions are taken at the middle and lower management levels and are related to routine activities of business.

Programmed decision: Programmed decision is otherwise called routine decision or structured decision. The reason is that these types of decision are taken frequently and they are repetitive in nature. Such decision is generally taken by middle or lower level managers, and has a short term impact. This decision is taken within the preview of the policy of the organization. Non-Programmed decision: Non programmed structures are otherwise called strategic decisions or basic decision or policy decision or unstructured decisions.

This decision is taken by top management people whenever the need arises. This decision deals with unique or unusual or nonroutine problems. Such problems cannot be tackled in a predetermined manner.

There are no established methods or readymade answers for such problems. Organizational decisions: Organizational decisions are decisions taken by an individual in his official capacity to further the interest of the organization known as organizational decision. These decisions are based on rationality, judgment and experience. Personal decisions: Personal decisions are decisions taken by an individual based on his personal interest.

These decisions are based on self ego, self prestige etc.

Objectively rational decision: If the decision is really the correct behavior for maximizing given values in a given situation, then it is called objectively rational decision. Subjectively rational decision: If a decision maximizes attainment relative to the actual knowledge of the subject, then it is called subjectively rational decision.

Consciously rational decision: A decision is consciously rational to extend that he adjustment of means to ends is a conscious process. Page 17 of 18 Unit- I. Economic model: Economic rationality implies that decision making tries to maximize the values in a given situation by choosing the most suitable course of action.

A rational business decision is one which effectively and efficiently assures the attainment of aims for which the means are selected. Clear and well defined goal: The decision makers has clear and well defined goal that he is trying to maximize. Uninfluenced by emotions: He is fully objective and rational uninfluenced by emotions. Identification of the problem: The decision makers can identify the problem clearly and precisely.

Alternative course of action: He must have clear understanding of alternative course of action by which a goal can be reached under existing circumstances. Analyze and evaluate alternatives: He must have the ability to analyze and evaluate alternatives in the light of the goals.

Effectively satisfies goal achievement: He must have a desire to come to the best solution by selecting the alternative that most effectively satisfies goal achievement. The decisions taken by the management should be of sound one.

The soundness of the decisions refers to its quality and reliability. If the decisions taken are not sound then it will mean waste of efforts and funds. The soundness of decision depends upon the sophistication of the decision maker, the information available to him and the techniques that he can make use of. Another problem that is faced by the management is timing of decision. If it is not properly timed, there is no use in taking a useful decision.

The physical and psychological environments have their influence on decision making.

UNIT I-MG2452-Engineering Economics and Financial Accounting Notes

If the environment is satisfactory then there will be co-operation, proper understanding among the members of the organization. This will provide better scope for research and analysis. Effective communication of the decision is another important administrative problem of the management.

Decisions taken should be clear, simple and unambiguous. Decision made should be communicated to the concerned persons in the language understandable by the receiver. All members of an organization should be encouraged to give their opinion on various aspects while arriving at important decisions.

In most cases, top executives feel that it is below their dignity to get their views. In such cases, decisions are taken by a few persons at the top management level. But this is not a good practice because making decision by a few at the top level will create some problem in its implementation.

Another problem faced by the management is implementation of decision. Once a decision is made, executive and his subordinates should take all possible steps to implement it.

While making decision, the manager may have consulted hired specialist but the finals decision will be of his own. Therefore, final responsibility lies on him. Implementation of decision involves several steps which brings a number of problems. Manager should handle it very carefully so that the problems can be tackled easily.

Page 18 of 18 Unit- I. Flag for inappropriate content. For Later. Related titles. Mg Engineering Economics and Financial Accounting. Jump to Page.

Search inside document. Santhosh Raja A. Bharath Sankar. Mohan Prasad. Pradhiba Selvarani. Britto Raj. Ramkumar Veeramani. Ganga Dharan. Corey Wells. Vishnu Krishnakumar. Anbarasan Sivaraj. Priya Sri. Shanmuga Priya. Karthick Subramaniam. Sathish Krishna. Popular in Public Finance. Paymaster Services. Venkatesh Gorur. Venkat Kumar. Makesh Gopalakrishnan. Hassan Ijaz. Whereas, the study of impact of taxes on rawmaterials will influence engineers to look for alternative materials for manufacturing or designing a product or processes which is of course a macro economic issue.

The demand analysis is microeconomic principle. Page 5 of 18 Unit- I 4. Engineering economics also take in its fold certain concepts and principles from other fields such as statistics, accounting, management, etc. Engineering economics aids decision making aspect of an engineer and it avoids the abstract nature of economic theory.

Engineering economics is mostly an application tool, whereas economics is a social science with broad characteristics. Economic theory conveniently ignores the significant backgrounds which are common to individual firms but engineering economics take in to consideration the individual firms environment of decision making.

Engineering economics provides an analytical and scientific approach resulting in qualitative decisions. Better decision making on the part of engineers. Efficient use of resources results in better output and economic advancement. Cost of production can be reduced. Alternative courses of action using economic principles may result in reduction of prices of goods and services.

Elimination of waste can result in application of engineering economics. Competitive strength on the part of the firm in adopting engineering economics. More capital will be made available for investment and growth. Improves the standard of living with the result of better products, more wages and salaries, more output, etc. From the firm applying economics. It may be viewed as a special branch of economics bridging the gulf between pure economic theory and managerial practice.

Managerial Economics is micro-economic in character. This is because the unit of study is a firm; it is the problems of a business firm which are studied in it. Managerial Economics does not deal with the entire economy as a unit of study. Managerial Economics largely uses that body of economic concepts and principles which is known as Theory of the Firm or Economics of the Firm. In addition, it also seeks to apply Profit Theory which forms part of Distribution Theories in Economics. Page 6 of 18 Unit- I 3.

Managerial Economics is pragmatic. It avoids difficult abstract issues of economic theory but involves complications ignored in economic theory to face the overall situation in which decisions are made.

Economic theory appropriately ignores the variety of backgrounds and training found in individual firms but Managerial Economics considers the particular environment of decision-making. Managerial Economics belongs to normative economics rather than positive economics also sometimes known as descriptive economics.

In other words, it is prescriptive rather than descriptive. The main body of economic theory confines itself to descriptive hypothesis, attempting to generalize about the relations among different variables without judgment about what is desirable or undesirable. Macro-economics is also useful to Managerial Economics since it provides an intelligent understanding of the environment in which the business must operate. This understanding enables a business executive to adjust in the best possible manner with external forces over which he has no control but which play a crucial role in the well-being of his concern.

Demand Analysis and Forecasting: A major part of managerial decision-making depends on accurate estimates of demand. Before production schedules can be prepared and resources employed, a forecast of future sales is essential. Cost Analysis: A study of economic costs, combined with the data drawn from the firms accounting records, can yield significant cost estimates that are useful for management decisions.

Production and Supply Analysis: Production analysis mainly deals with different production function and their managerial uses. Supply analysis deals with various aspects of supply of a commodity. Certain important aspects of supply analysis are: Supply schedule, curves and function. Law of supply and its limitations, Elasticity of supply and Factors influencing supply. Profit Management: Business firms are generally organized for the purpose of making profits and, in the long run, profits provide the chief measure of success.

In this connection, an important point worth considering is the element of uncertainty existing about profits because of variations in costs and revenues which, in turn, are caused by factors both internal and external to the firm. Capital Management: Capital management implies planning and control of capital expenditure. Opportunity Cost Principle: By the opportunity cost of a decision is meant the sacrifice of alternatives required by that decision. Thus, it should be clear that opportunity costs require ascertainment of sacrifices.

If a decision involves no sacrifice, its opportunity cost is nil. For decision-making, opportunity costs are the only relevant costs. The opportunity cost principle may be stated as under: The cost involved in any decision consists of the sacrifices of alternatives required by that decision. If there are no sacrifices, there is no cost.

Page 7 of 18 Unit- I 2. Incremental Principle: Incremental concept involves estimating the impact of decision alternatives on costs and revenues, emphasizing the changes in total cost and total revenue resulting from changes in prices, products, procedures, investments or whatever may be at stake in the decision.

The two basic components of incremental reasoning are: Incremental cost and incremental revenue. Incremental cost may be defined as the change in total cost resulting from a particular decision. Incremental revenue is the change in total revenue resulting from a particular decision.

Principle of Time Perspective: The economic concepts of the long run and the short run have become part of everyday language.

Managerial economics are also concerned with the short-run and long-run effects of decisions on revenues as well as costs. The really important problem in decisionmaking is to maintain the right balance between the long-run and the short-run considerations.

A decision may be made on the basis of short-run considerations, but may as time elapses have longrun repercussions which make it more or less profitable than it at first appeared.

Discounting Principle: One of the fundamental ideas in economics is that a rupee tomorrow is worth less than a rupee today. This seems similar to saying that a bird in hand is worth two in the bush. If a decision affects costs and revenues at future dates, it is necessary to discount those costs and revenues to present values before a valid comparison of alternatives is possible. Equi-marginal Principle: This principle deals with the allocation of the available resources among the alternative activities.

According to this principle, an input should be so allocated that the value added by the last unit is the same in all cases. This generalization is called the equi-marginal principle. Managerial Economics and Economics: Managerial Economics has been described as economics applied to decision-making.

Economics has two main divisions: micro-economics and macro-economics. Micro-economics has been defined as that branch where the unit of study is an individual or a firm. Macro-economics, on the other hand, is aggregative in character and has the entire economy as a unity of study. Managerial Economics and statistics: Managerial Economics employs statistical methods for empirical testing of economic generalizations.

These generalizations can be accepted in practice oly when they are checked against the data from the world of reality and are found valid. Managerial Economics and Mathematics: Mathematics is yet another important tool-subject closely related to Managerial Economics. This is because Managerial Economics is metrical in character, estimating various economics relationships, predicting relevant economic quantities and using them in decision-making and forward planning.

Managerial Economics and Accounting: Managerial Economics is also closely related to accounting which is concerned with recording the financial operations of a business firms. Indeed, accounting information is one of the principal sources of data required by a managerial economist for his decision-making purpose. Managerial Economics and Operations Research: The significant relationship between managerial economics and operations research can be highlighted with reference to certain important Page 8 of 18 Unit- I problems of managerial economics which are solved with the help of or techniques.

The problems are: allocation problems, competitive problems, waiting line problems and inventory problems. Managerial Economics involves application of economic principles to the problems of the firm. Economics deals with the body of the principles itself. Managerial Economics is micro-economic in character; Economics is both macro-economic and micro-economic. Managerial Economics, though micro in character, deals only with firms and has nothing to do with an individuals economic problems.

But micro-Economics as a branch of Economics deals with both economics of the individual as well as economics of the firm. Under Micro-Economics as a branch of Economics, distribution theories, viz. Thus, the scope of Economics is wider than that of Managerial Economics. Economic theory hypothesizes economic relationships and builds economic models but Managerial Economics adopts, modifies and reformulates economic models to suit the specific conditions and serves the specific problem solving process.

Thus Economics gives the simplified model, whereas Managerial Economics modifies and enlarges it. Economic theory makes certain assumptions whereas Managerial Economics introduces certain feedbacks such as objectives of the firm, multi-product nature of manufacture, behavioural constraints, environmental aspects, legal constraints, constraints on resource availability, etc. Decision Making and Forward Planning: Managerial economists play a vital role in managerial decision making and forward planning.

Inventory Schedules of the Firm: He plays an effective role in price fixation, location of a plant, quality improvement, etc. Demand Forecasting: The most important role of the managerial economist relates to demand forecasting.

Economic Analysis: The managerial economists undertake an economic analysis of the industry. Finance sector decisions have a decisive impact on well-being. The authors present approaches to monetary management in both closed and open economies that highlight major policy dilemmas. One of the great mysteries and elegant features of the financial system in general, and of the banking sector in particular, is the creation of new money.

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This book provides technical support for students in finance. Miller, who came to prominence in the s and have dominated the world of finance ever since. This book of Exercises reinforces theoretical applications of stock market analyses as a guide to Corporate Valuation and Takeover and other texts in the bookboon series by Robert Alan Hill.

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Satisfying behaviour or satisfying behaviour. Competition risks: For eg. The short run is a period where adjustments cannot be made quickly in matters of supply and demand. A minimum profit is necessary to satisfy the shareholders or else managers job security is endangered. Incremental cost and incremental revenue. In a capitalist economy neither an individual nor any institution takes decisions in a planned manner concerning its day-to-day functioning.

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