MANAGEMENT 1: MCI102S

CHAPTER 1
Department of Civil Engineering & Surveying

Cape Peninsula University of Technology

S. Manyumwa
INTRODUCTION

What is an Engineer? one who has and uses

scientific, technical and other pertinent knowledge
and skills to create, enhance, operate or maintain
safe, efficient systems, structures, plant, processes
or devices of practical & economic value
(Engineering Council UK).
INTRODUCTION
Engineering involves providing solutions to problems
of economic importance and which will lead to the
progress of society.
Civil engineering is therefore at base of economy
with following main functions:
Provision of water & electricity
Refuse removal & sanitation
Transport
Development of structures
PARTIES INVOLVED
Architect
Engineer
Quantity surveyor
Geologist
Land surveyor
Surveyor
Town and regional planner
ROLE OF ENGINEER IN SOCIETY
Designing materials, components, systems or processes;

Planning the capacity and location of infrastructure;

Investigating, advising and reporting on engineering problems;

Improvement of materials, components, systems or processes;

Managing or operating plant and processes;

Managing implementation or construction projects;

Implementing designs or solutions;

Research, development and commercialization of products, and

Education, training and development of engineering personnel.

(ECSA WEBSITE: accessed 30June 2014)
INTRODUCTION
Management ????????????
WHY MANAGEMENT FOR
ENGINEERS
Management of projects
Work requires working in teams
Health, safety, environmental, economic &
sustainability risks that must be managed
Legislation requires registration and subscribing to a
code of conduct for the profession.
Ethical conduct within the bounds of applicable
legislation.
ENGINEERING SKILLS &
KNOWLEDGE
Communicate effectively, both orally and in writing within an engineering context.

Demonstrate knowledge and understanding of the impact of engineering activity on the society,
economy, industrial and physical environment, and address issues by defined procedures.

Demonstrate knowledge and understanding of engineering management principles and apply

these to ones own work, as a member and leader in a technical team and to manage projects.

Engage in independent and life-long learning through well-developed learning skills.

Understand and commit to professional ethics, responsibilities and norms of engineering

technical practice.

Demonstrate an understanding of workplace practices to solve engineering problems consistent

with academic learning achieved.

(ECSA exit level outcomes)

ENGINEERS WORK ENVIRONMENT
Social people management, diversity, social
responsibility
Economic & international economic indicators,
global influence (multi-national operations)
Physical pollution, sustainability, environmental
management
Institutional-political resource distribution, power &
politics
ENGINEERS WORK ENVIRONMENT
Technological scientific & technological
development in society

Changes in any environments will have impact on

organisation which must be managed.
ECONOMIC PRINCIPLES
ECONOMY
Study of how people & community decides which of
its many needs can be satisfied with the scarce &
alternative resources available to them.

Two fields: micro economics & macro economics

Economic sectors primary sector e.g. mining;

secondary sector e.g. construction; tertiary sector
e.g. transport & services, tourism
CLASS DISCUSSION

Describe the main characteristics of the

economy of the Western Cape.
ECONOMIC CYCLE
SUPPLY & DEMAND PRINCIPLE
Financial Management
Why Finance for Engineers?
Goal of business
Making money =
cornerstone of business
Making financial
decisions for both
corporate & personal
lives.
Financial Statements & Analysis
The shareholders report
Documents the firms financial activities of the past
year.

Four Key Financial Statements

Statement of comprehensive income (income
statement)
Statement of financial position (balance sheet)
Statement of changes in equity
Statement of cash flows
Basic Concepts of Financial Reporting
Statement of financial position (the
balance sheet)

ASSETS
LIABILITIES EQUITY
Investments by owners
Earned Equity
The accounting equation

Assets = Liabilities + Equity

Assets Liabilities = Equity

Exercise (accounting equation)
XYZ Ltd expanded rapidly during 2010 by investing in
new plant and equipment and other inventory. As a
result, total assets increased from R40 million at the
beginning of 2010 to R70 million at the end of 2010. The
equity at the beginning of 2010 was R25 million and the
companys net profit for the year was R5 million.
Assuming that the company did not pay any dividends in
2010:
What were the companys total liabilities at the beginning
and at the end of 2010 if there were no changes in
shareholding capital of the company during 2010?
Solution
At beginning of year, Total Liabilities = 40 25 =
R15 million

At end of year, Total Liabilities = 70 30 = R40

million
Exercise 2: Accounting Eqn
The founders of Malick Construction company
invested a total of R4 million upon formation of the
company two years ago. No dividends have been
paid. Now the company has total assets of R1, 7
million, current assets of R800 000, current liabilities
of R950 000 and long term liabilities of R500 000. Do
you think that the company has been successful
during its first two years of operation? (Hint: Look at
change in equity over the 2 years).
Solution Exercise 2
Equity as at 2 years ago = R4 million
Assets = Total Liabilities + Equity
Equity Now = 1 700 000 (950 000 + 500 000) =
250 000

The companys equity has decreased from R4 million

to a mere R250 000 in two years which means the
company realised a severe loss in those two years
hence it has not been successful so far.
Statement of comprehensive income
INCOME COST = PROFIT / LOSS

Profit goes to:

Government taxes
Shareholders (dividends)
Enterprise (retained earnings)
Time value of money concept
Time value of money money is more valuable today
than money in the future

Present value (P) value of money at time now

Future value (F) value of money you will receive in

the future

Money is a scarce resource hence consider the cost

of utilising this resource.
Economic comparison formulae

NB: All rates are percentages expressed as a

decimal i.e. A rate of 10% is written as 0.1 and 15%
as 0.15
Compound interest

FV = PV( 1 + i )n
M is the final amount including the principal (FV).
P is the principal amount (PV).
i is the rate of interest per year.
n is the number of years invested.
Applying the Formula
Let's say that I have $1000.00 to invest for 3 years at rate
of 5% compound interest.
M = 1000 (1 + 0.05)3 = $1157.62.
You can see that my $1000.00 is worth $1157.62.
Present value
PV = FV/(1 + i )n

If a sum of R4 046 is required in 10 years time, what

sum has to be invested at 15%?

(Answer: R1 000. This sum is called the present value)

Inflation
Same formula as PV.

If the inflation rate is 15% what will R1 000 be worth

in 10 years time at todays values?

(Answer: R247)
Uniform series (annuities)
A stream of equal periodic cash flows over a
specified time period.

Usually annual but can be monthly e.g. Car

payments

Finding future value of a uniform series

Finding present value of a uniform series

PV of a regular series
PV = A[(1+i)n 1]/ [i(1+i)n]

The present value of R100 each year for 5 years at

15% is R335,21 i.e. R335,21 is the amount you
would have to invest today to pay off R100 each year
for the next 5 years.
Capital recovery(bonds, mortgages)

A = PV[ i(1+i)n]/ [(1+i)n 1]

To pay off a mortgage of R50 000 in 25 years at

15% per annum, I must pay R7 735 per year or
R645 per month.
END!!!!!