Let's begin by asking the question, what should you expect to get out of this course? As a technical person in industry, you generally have two career paths. One path is to become a highly sought after subject matter expert, your company's most knowledgeable person in say, structural dynamics. Alternatively, you can take the path of management. Many of you are interested in becoming leaders in your organization and that is what we're going to focus on in this course. Building the skills and knowledge that allows you to differentiate yourself from your peers and prepare you for your next big assignment as a manager. For me, I'm a very practical person and that carries over to what we'll talk about. We won't get bogged down in theory but more on how to apply the theory in your day job. I want you to become comfortable with the tools and techniques that we're going to develop. I also want you to learn the terminology behind what we're talking about so you can communicate effectively with other members of your organization, especially the financial team. That's my goal for you in this course. How might you be involved in financial matters at your company? Imagine that you're an Aerospace Engineer with a job designing small satellites for high resolution imaging applications, you have an idea that you believe will reduce the growing space junk problem using an innovative and scalable debris collection technology. The new technology requires several million dollars to develop over the next three years and if successful, could be implemented two years after that. How do you propose this idea and all of its benefits to the executive office to secure the funding and develop the technology. Or that you're an Environmental Engineer with the job of developing new products that help companies create a positive environmental impact. Your team has developed a new filtration system that effectively separates microplastics from beach sand. The product can be used in many resort and tourists locations and creates a raw material source for plastic recycling. What's the financial business case for this new product? A very important part of this course is this particular issue. It's budgeting time and your company has one million dollars to spend on new projects. You propose an 800,000 dollar project that represents engineering, perhaps a new product development project and you go to your bosses and say, I need 800,000 of that 1 million dollars to develop this new product line. Of course, at the same time, the manufacturing people say they need new equipment to manufacture products more efficiently and they propose an 800,000 dollar product. Marketing wants to fund a new marketing campaign to sell more of the company's products and they propose an 800,000 dollar project. All of these groups are asking for a large chunk of the available 1 million dollars. The question is, how does management decide which one to pick? Ninety nine percent of the time, it's going to be the project that provides the greatest financial returns for the company. We're going to learn how to determine financial viability so that when it comes time for you to pitch a project, you'll know what management is looking for and you'll be able to communicate the benefits of your project very effectively. Some of you might be interested in starting your own company and you need to know more about business and especially finance and the whole concept of cash flow. One thing I've learned when I talk to engineers that turn themselves into entrepreneurs is that they thought they would be still doing all the technical work that often led to the formation of the startup. Yet once they started their company, these new CEOs very quickly found out that they spend most of their time asking people for money. If your goal is to launch a company based on technical developments that you've made, you need to understand finance because that's what investors want to hear about. There's nothing better than a very savvy technical person who understands the details behind electric vehicles and solid state lithium ion technologies, but who can also communicate critical financial information to investors that are going to be giving them the money. Few people can do both of those things very well. Financial management is about evaluating historical data and building future economic forecasts and scenarios based on long-term financial projections, all with the goal of making the right decision for the company to achieve its financial objectives. To me, financial management is a lot simpler than what you might find in an 800 page textbook. It's a lot of interesting number crunching that identifies the optimum path among many alternatives using equations that are not terribly complex and input values based on historical performance, all with the goal of making your best estimate of what the future outcome might be. That's it. Now admittedly, the hardest part for engineers is forecasting the future because it involves estimating what the future will look like and we hate estimating things. We love to look up data in a handbook, say heat transfer coefficients for a specific material and then plug it into a complex equation to come up with highly accurate heat loss figures. But with finance, we flip that around, the equations are straightforward but defining the values to put into those equations can be frustrating and the results turn out to be our best guesses of what is going to happen. We're not trained to make guesses. We're going to talk about estimation techniques that lead to a very reliable result. As this is the second course in the finance for technical managers specialization, we'll begin with a brief review of time value of money and add a few more tools to your toolbox. We'll take a look at a project's estimated future cash flows and perform what is known as a discounted cash flow analysis to determine whether the project is financially worthwhile. This gets us into concepts such as net present value, internal rate of return and payback period. This takes us to a company's capital budgeting process, the metrics any company uses to select the best projects to invest in from among the many. Then we'll see how depreciation, taxes, and inflation impact those cash flows. Finally, we'll wrap things up by building a business case for a new product development initiative, a business case that you could easily present to the executive office. By the end of this course, you'll understand and apply the principles of time value of money, you'll be able to establish whether a project is financially worthwhile or not, and you'll see how depreciation, taxes, and inflation impact a project's cash flows. You'll be able to build a financial business case for a new product introduction project. Finally, you'll be able to communicate with your financial colleagues with confidence using the language of business. That's a lot to learn in a short period of time and the question is, are you ready? Then, let's get right to it. Next time, we'll go over how the course will work, what I call course mechanics. We'll learn more about the topics we'll cover, the assessments that you'll have and how they'll be graded. All the details you will experience over the next several weeks of the course. I'm hoping this is what you signed up for. I'm excited to be a part of your journey into the world of finance. It will be fun and an important part of your development as a technical person preparing to become a business leader. I'm Michael Readey, and I'll see you next time.
