An introduction to financial tools and concepts from an operations perspective, addressing finance/operations trade-offs and explaining financial accounting, working capital, investment analysis, and more.
Students and practitioners in engineering and related areas often lack the basic understanding of financial tools and concepts necessary for a career in operations or supply chain management. This book offers an introduction to finance fundamentals from an operations perspective, enabling operations and supply chain professionals to develop the skills necessary for interacting with finance people at a practical level and for making sound decisions when confronted by tradeoffs between operations and finance. Readers will learn about the essentials of financial statements, valuation tools, and managerial accounting.
The book first discusses financial accounting, explaining how to create and interpret balance sheets, income statements, and cash flow statements, and introduces the idea of operating working capital—a key concept developed in subsequent chapters. The book then covers financial forecasting, addressing such topics as sustainable growth and the liquidity/profitability tradeoff; concepts in managerial accounting, including variable versus fixed costs, direct versus indirect costs, and contribution margin; tools for investment analysis, including net present value and internal rate of return; creation of value through operating working capital, inventory management, payables, receivables, and cash; and such strategic and tactical tradeoffs as offshoring versus local and centralizing versus decentralizing. The book can be used in undergraduate and graduate courses and as a reference for professionals. No previous knowledge of finance or accounting is required.
Alejandro Serrano is Professor of Supply Chain Management at the MIT–Zaragoza International Logistics Program, Lecturer at IESE Business School, and Research Affiliate at the MIT Center for Transportation and Logistics.
Spyros D. Lekkakos is Assistant Professor at the MIT–Zaragoza International Logistics Program and Research Affiliate at the MIT Center for Transportation and Logistics.
Serrano and Lekkakos have done an exceptional job of explaining essential finance concepts using an approach that makes perfect sense for supply chain managers and engineers. The insights in this book will help supply chain students and practitioners hit the ground running and link their knowledge of operations processes to the impacts they can have on the bottom line of the business.
Daniel Stanton, author of Supply Chain Management for Dummies
Practitioners as well as educators will find this book useful for explaining how operations impacts the broader business as measured through financial reports. The authors bring their classroom expertise and academic excellence to the pages.
Yossi Sheffi, Elisha Gray II Professor of Engineering Systems, MIT; author of The Resilient Enterprise