Overview

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This course discusses corporate financial statements such as the income statement, balance sheet and statement of cash flows. The course describes how to read and interpret them, using techniques such as ratio analysis to assess a company's financial health. It then shows the process of creating departmental budgets for engineering cost centers and pro forma statements for profit centers. As all future-looking financial estimates involve uncertainty, risk management measures such as scenario analysis and sensitivity analysis are developed to create best-case, most likely case, and worst case analyses. Finally, many businesses today are incorporating various aspects of sustainability into their operations. The course wraps-up with how these initiatives are communicated via annual sustainability reports, using frameworks such as the Global Reporting Initiative (GRI) and Corporate Sustainability Reporting Directive (CSRD) that ensure transparency and common metrics for investors. This course can be taken for academic credit as part of CU Boulder’s Master of Engineering in Engineering Management (ME-EM) degree offered on the Coursera platform. The ME-EM is designed to help engineers, scientists, and technical professionals move into leadership and management roles in the engineering and technical sectors. With performance-based admissions and no traditional application process, the ME-EM is ideal for individuals with a broad range of undergraduate education and/or professional experience. Learn more about the ME-EM program at https://www.coursera.org/degrees/me-engineering-management-boulder.

Syllabus

Understanding Financial Statements

Investment decisions are often based on a company’s financial performance, and such performance is captured in its financial statements. The three examined in this course are the income statement, the balance sheet, and the statement of cash flows. Collectively, these provide a clear picture of a company’s profitability, its net worth, and how it manages its cash.

Analyzing Financial Statements: Ratio Analysis

Financial statements inform management and investors about a company’s financial performance in absolute terms – dollars and cents. But it is often more valuable to understand performance in relative terms, such as gross profit relative to revenues, measured as a percentage. This makes it easier for management to compare one year to another and for investors to compare one company to another. Ratio analysis is the way this is done, and there are several categories of ratios that measure a company's liquidity, profitability, debt management, and investment potential.

Budgeting and Forecasting

Technical Managers are often tasked with preparing an annual budget for their project team, department, or product line. This involves estimating future costs, and in the case of a profit center, forecasting future revenues. Such forecasts can be made more reliable through a combination of qualitative and quantitative techniques.

Risk Management Techniques

Forecasting future revenues and costs for a project invariably involves uncertainty, and such uncertainty equates to financial risk - the greater the uncertainty, the greater the risk. Risk management is about mitigating financial risk by assessing a project’s valuation under a range of different conditions, identifying the variables that most contribute to risk, and creating a plan to minimize the likelihood of any financial downside.

Sustainability Reporting

Sustainability has become an important consideration in how businesses operate and govern themselves. Managers today focus on their company’s Triple Bottom Line: measuring environmental and social impacts along with their financial performance. Investors are interested in this too, and in response, companies with sustainability as a strategic objective now report their non-financial performance – enabling investors to assess progress toward sustainability goals.