INTRODUCTION - ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING

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BE.CS FINAL YEAR & IT THIRD YEAR, ANNA UNIVERSITY, CHENNAI

Transcript of INTRODUCTION - ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING

Page 1: INTRODUCTION - ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING

Dr.K.Baranidharan

Present by…

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Engineering Economics &

Financial Accountingment

Ee&fa2April 7, 2023

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Sri Sairam Institute of Technology

Prepared by :Dr. K. BARANIDHARAN

ENGINEERING ECONOMICS

AND FINANCIAL

ACCOUNTING

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Sri Sairam Institute of Technology 4

ENGINEERING ECONOMICS

 Engineers have an added responsibility and

that is to include economics in their

calculation & decisions. When the

economics principles are applied to engg.

Problems, then a new branch of knowledge

called engineering economics

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Sri Sairam Institute of Technology 5

ECONOMICS

Economics is a social science that

studies the behavior of human

beings. Organization or any entity

mode up of human beings in

situations involving choice.

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ECONOMIC ACTIVITIESThe activities are carried out with the purpose of earning on income or making money, they are called economic activities.

Activities involvue MONEYEarning income in either CASH or KIND6

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NON-ECONOMIC ACTIVITIES

The activities that are performed out of LOVE, affection and social concern but not for money

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ECONOMIC CIRCLE

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ECONOMICS - DEFINITIONFATHER OF ECONOMICST:- Adam Smith

defined economics as “Economics is the sciences of wealth”

wealth?Wealth has been defined as “stock of goods

existing at a given time that have money value”.

classification of wealth.Personal wealth(individual wealth)Social wealth( collective wealth)National wealth (a+b)Cosmopolitan wealth (e.g. ocean)

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Alfred Marshall Economics is defined as “a study of mankind in the ordinary business of life”

Lionel Robbins’:Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses

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MICRO ECONOMICSMicro means small. Micro economics deals with problems such as the output of a single firm, price of a single commodity and spending on goods by a single household.11

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MACRO ECONOMICSMacroeconomics studies the economic system as a whole. In it, we get the complete picture of the working of the economy. It is a study of economic aggregate such as total employment, savings, and investment

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DIVISION OF ECONOMICS

ConsumptionProduction ExchangeDistributionPublic Finance

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types of the economic systems

CAPITALIST ECONOMY:An economic system based on private ownership of capital

Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.14

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MIXED ECONOMY

Both private individuals and government participate in seeking answers for the above economic.

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FREE OR LAISSEZ-FARE ECONOMY

The economy where government keeps its hands off such major economic decisions.

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S R I S A I RA M I N S T I T U T E O F T E C H N O L O GY

MANAGERIAL ECONOMICS

MEANINGManagerial economics is

economics applied in decision making. It is the branch of economics which serves as a link between abstract theory and managerial practice.

It is based on the economic analysis for identifying problems,organizing information and evaluating alternatives

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DEFINITIONS OF M E―Managerial economics is the of economic modes of thought to analyse business situationǁ

•-MC.NAIR AND MERIAM

―Managerial economics is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by the management.

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NATURE OF M E

• 1. It is microeconomic in character as it concentrate only on the study of the firm not on the working of the economy

• 2. It takes help from the macroeconomics to understand the environment in which the firm operates‘

• 3. It is normative rather than positive i.e., it gives answer for the question what ought to be than what is,was.

• 4. It is both conceptual and metrical.

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• 5. It focuses mainly on the theory of the firm than on distribution‘

• 6. Knowledge of managerial economics helps in making wise choices. i.e., choices among scarcity of resources.• 7. It is goal oriented i.e., aims at

achievement of objectives

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SIFNIFICANCE OF M E 1. It helps in decision making 2. Decisionmaking means a balance between

simplification of analysis to be manageable and complication of factors in hand

3. It helps the manager to become an more competent builder

4. It helps in providing most of the concepts that are needed for the analysis of business problems,

The concepts such as elasticity of demand ,fixed, variable cost, SR and LR costs, opportunity costs,NPV

etc.,

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5. It helps in making decisions in the following.

What should be the product mix?

Which is the production technique?

What is the i/p mix at least cost?What should be the level of output and price?

How to take investment decisions?

How much should the firm advertise

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OBJECTIVES OF M ETo help in understanding the market condition & general economic environment with in which the firm operate.

To provide a philosophy for understanding & analyzing resource allocation problem

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SCOPE OF M EObjectives of a business firmDemand analysis and forecastingCost analysisProduction managementSupply analysisPricing decisions, policies and practices

Profit managementCapital budgeting and investment decisions

Decision theory under uncertainty

Competition

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MAIN AREA OF M E, 1.DEMAND DECISIONTHe Forecasting Of Demand For A Given Product And Service Is The First Task Od The ME.

The behavioural implication such as the customer response to given changes of price and supply.

The changes of income levels of customer

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2.INPUT-OUTPUT DECISION

The cost of inputs in relation to output are studied to optimise profits.

Production and cost function are estimated to certain parameters,

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3.PRICE-OUTPUT DECISION

The Production Is Ready And The Task Is Determine The Price In Different Market Situation Such As Perfect And Imperfect Markets Ranging From Monopoly.

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4.PROFIT - RELATED DECISIONThe technique such as Break Even Analysis, cost reduction and control and ratio analysis to ascertain the level of profit.

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5.INVESTMENT DECISIONInvestment decision are also called capital budgeting decisions.

Involve the large fund commitment, which determine the fate of the firm.

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6.ECONOMIC FORECASTING AND FORWARD PLANNINGThe economic forecasting leads to

the forward planning.The firm operate environment which

is dominated by the INTERNAL AND EXTERNAL factors.

EXTERNAL: govt policy, competitation, employment, labour, human resources, finance, marketing..

INTERNAL: policies, procedures relating to the finance, people, market and products….

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M E related with OTHER DISCIPLINES

Managerial Economics and Traditional Economics:

Economics and Managerial economics both are facing identical problems,i.e., problem of scarcity and resource allocation.

Since labour and capital are always limited it must find way for effective utilizing of these resources.

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ITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

HELP IN UNDERSTANDING THE MARKET CONDITIONS AND THE GENERAL ECONOMIC ENVIRONMENTWITHIN WHICH THE FIRM OPERATES.

TO PROVIDE THE PHILOSOPHY FOR UNDERSTANDING AND ANALYSING THE RESOURCE ALLOCATION PROBLEMS

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1. M E OPERATIONS RESEARCH

Both operations research and managerial economics are concerned with taking effective decisions, managerial economics is a undamental academic subject which seeks to understand and to analyse the problems of business decision making while OR is an activity carried out by functional specialist within the firm to help the manager to do his job of solving decision problems

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ITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

OR models like queuing,linear programming etc.., are widely used in managerial economics

Model building, economic models are more general and confined to broad economic decision making

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2.ML ECONOMICS AND MATHEMATICS

Mathematics is closely related to managerial because managerial economics ,being conceptual but also metrical.

Its metrical property is used to estimate and predict the relevant economic factors for decision making and forward planning

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ITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

Geometry, algebra and calculus

Logarithms and exponential, vectors and determinants, input-output tables etc.,

Even OR can be included as a part of mathematical exercise

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3. MANAGERIAL ECONOMICS AND STATISTICS

Statistics is widely used in managerial economics. It is mainly needed for a correct judgement

and decision makingITS MAIN CONTRIBUTION TO MANAGERIAL ECONOMICS

To handle the unforeseen circumstances the theory probability is mainly used.

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4.MANAGERIAL ECONOMICS AND THE THEORY OF DECISION MAKING

The theory of decision making is relatively a new subject that has significance for managerial economics.

Much of economic theory is based on the single goal MAXIMISATION OF PROFIT, but theory of decision making recognizes the multiplicity of goals and the pervasiveness of uncertainity

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5.ROLE OF MANAGERIAL ECONOMIST IN BUSINESS

The task of organizing and processing information and then making an intelligent decision based upon two general forms

Task of making Specific decisions

Task of making General decisions

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Task of making Specific decisions

Production schedulingDemand forecastingMarket researchEconomic analysis of the industryInvestment appraisalSecurity management appraisalAdvice on tradeAdvice on foreign exchange managementPricing and related decisions

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Task of making General decisionsAnalysing the general economic condition of the economy

Analyzing the demand for the product

Analysing the general market condition of the economy

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6.ACCOUNTANCYAccountant provides accounting information relating to cost, revenues, receivables, payables, profit/losses. In the data performance of the firm result.

Decision making and forward planning.

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7.PSYCHOLOGYCONSUMER PSYCHOLOGY is the bsis on which a ME acts.

The customer react the change the price or supply and it is effect of demand/profits is the main focus study of ME.

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8.Organisational behaviour

The study develop behavioural model of firm integrating the manager’s behaviour with that of the owner.

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Dr.K.BaranidharanTHANK YOU