Financial Management for Engineers Flashcards
6 cards from real MEM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Management for Engineers flashcards as text
What is the 'time value of money' principle in engineering financial management?
Answer: A dollar today is worth more than a dollar in the future
The time value of money states that a dollar available today can be invested to earn returns, making present money worth more than the same amount in the future.
Which metric represents the annual rate of return at which a project's NPV equals zero?
Answer: Internal rate of return (IRR)
The IRR is the discount rate that makes the net present value of all cash flows from a project equal to zero.
When constructing a business case for a new engineering initiative, which financial document best demonstrates how cash will flow in and out monthly?
Answer: Cash flow forecast
A cash flow forecast details projected cash inflows and outflows over time, essential for ensuring a project remains solvent during execution.
What is the primary distinction between a capital expenditure (CapEx) and an operating expenditure (OpEx)?
Answer: CapEx acquires long-term assets; OpEx covers day-to-day operations
CapEx involves purchasing or upgrading long-term assets (equipment, facilities), while OpEx covers recurring costs needed to run daily operations.
In break-even analysis, what happens to the break-even point if fixed costs increase while variable cost per unit and selling price remain constant?
Answer: Break-even point increases
Higher fixed costs mean more units must be sold to cover total costs, so the break-even point (in units) rises proportionally.
Which financial ratio is most relevant for assessing how efficiently a company uses its assets to generate revenue?
Answer: Asset turnover ratio
The asset turnover ratio (Revenue ÷ Total Assets) measures how effectively management uses the company's assets to produce revenue.