In the realm of HVAC engineering, the quest for optimal indoor comfort extends its dominion into the cold and chilly winter months. At the core of winter air-conditioning systems lies a meticulously designed network of components, strategically arranged for achieveing the desired thermal control. Achieving the desired indoor air conditions in winter mirrors the requirements of summer as shown in How Do Air Conditioners Work in Summer? The standard configuration of essential equipment and psychrometric chart below, illustrates the winter air conditioning system. This setup, involves the sequential passage of air through a preheating coil, then a humidifier, and finally a second preheating coil. As curious HVAC enthusiats, let us delve into the inner workings of these systems, dissecting the components and processes that orchestrate indoor comfort amidst the winter chill.
Winter Air Conditioning System and Psychrometric Chart. Source: Electrical Workbook.
Enhancing Winter Comfort: Double Reheat Coils and Air Washer
In times of severe winter, adjustments are imperative to elevate the Dry Bulb Temperature (DBT) and Relative Humidity (RH) of the air. This can be achieved by adding an air washer and double in reheat coils on a winter airconditiong system. This is shown in the image below with its corresponding psychrometric representation. Here, processes such as air mixing (Condition 4), sensible heating (Process 4–5), adiabatic cooling (Process 5–6), and additional sensible heating in the reheat coil (Process 6–1) collectively contribute to cooling, dehumidification, and compensating for heat and vapor losses in the conditioned room. In large systems, the incorporation of re-circulating air fans and supply air fans is common but does not alter the processes outlined in the psychrometric chart.
Air washer and double reheat coils on winter air conditioning system. Source: EIT
Utilizing Outdoor Air Economically: 100% Outdoor Air with Pre-heating
Efficient design of air-conditioning systems mandates the exploitation of internal heat emissions whenever feasible. The system shown below exemplifies the use of waste heat from exhaust for preheating fresh air. As detailed in Audel HVAC Fundamentals, Volume 1: Heating Systems, Furnaces and Boilers this arrangement employs air washers as humidifying devices, countering moisture losses in the conditioned space while purifying the air. The reheat coil assumes a crucial role in regulating heat supply, thereby controlling the DBT of the air-conditioned space.
Winter air conditioning employing 100% outdoor air with preliminary heating through the utilization of waste heat from the exhaust. Source: EIT.
Detailed Processes: Preheating, Humidification, and Sensible Heating
Delving into the technical intricacies, Process 4–5 involves preheating fresh air using waste heat from the exhaust. Meanwhile, Process 2–3 signifies the cooling of exhaust air, Process 5–6 orchestrates humidification through steam, and Process 6–1 contributes sensible heating in the reheat coil. Process 1–2 encapsulates the cooling and dehumidification of air, offsetting heat and vapor losses in the conditioned space. Notably, in winter air-conditioning systems requiring heating, the use of outdoor air should be minimized, aligning with principles of energy efficiency and sustainability.
Welcome to the first installment of our blog series, “Engineer Your Finances.” In this series, we embark on a journey to demystify the world of financial management through the lens of an engineer. Our goal is to provide you with practical insights that will empower you to navigate the financial terrain with confidence.
Finance can be seen as a complex system much like the engineering projects you’re accustomed to. Understanding the principles of financial management is like deciphering the blueprint of a structure before construction. So, let’s dive into the foundational aspects of financial statements, the pillars of financial understanding.
Understanding Financial Statements – First Principles
Financial statements are the lifeblood of any business, reflecting its health, performance, and overall well-being. Think of these statements as the technical blueprints for your business, detailing its structure and functionality. In this post, we’ll dissect the basics, understanding the purpose, components, and significance of financial statements.
Imagine a civil engineer examining architectural drawings to ensure a building’s structural integrity. Similarly, we’ll guide you through the essential components of financial statements, allowing you to analyze the financial health of a business like a seasoned engineer inspecting a project’s blueprints.
1. The Dual Aspect Principle: Balancing Act for Engineers
The financial world operates on the dual aspect principle, a fundamental concept that every financial transaction has two sides – assets and equities/liabilities – and they must remain in equilibrium. This principle is akin to the delicate balance engineers strive for ensuring that forces balance – as Newton’s 3rd Law of Motion demands. We’d actually go as far as saying the dual aspect principle is to accounting what the right hand rule is to engineering!
The balance sheet, a fundamental accounting report, embodies the equation Assets = Equities + Liabilities, serving as a cornerstone for financial understanding. It meticulously records transactions, balancing assets against equities at specific points, exemplified by the year-end snapshot of ABC Pty (Ltd) in 2021 and 2022 below. More examples cane be found in Financial Decision Making for Engineers Following the dual aspect principle, assets on the left equate to claims on the right. In this balance sheet, assets and equities are classified into current assets, fixed assets, and other categories, offering a minimum detail overview.
The format aligns with the widely accepted practice of displaying assets on the left and equities on the right. Key categories include current liabilities and shareholders’ equity. The balance sheet’s illustrative example unveils the financial position, showcasing the intricate interplay between assets, equities, and liabilities for insightful analysis, crucial for engineers and technicians navigating financial landscapes.
Balance Sheet for ABC Engineers Pty (Ltd)
As of 31 December 2021
ASSETS
AMOUNT (Thousands of Dollars)
CLAIMS ON ASSETS
AMOUNT (Thousands of Dollars)
CURRENT ASSETS
CURRENT LIABILITIES
Cash
$52
Accounts payable
$87
Accounts receivable
$250
Notes payable
$110
Marketable securities
$175
Accruals
$10
Stock
$355
Provision for tax
$135
Total Current Assets
$832
Total Current Liabilities
$342
FIXED ASSETS
LONG TERM LIABILITIES
Plant & equipment
$1610
Mortgages
$520
Depreciation
-$400
Debentures
$200
Net plant & equipment
$1210
Total long term liabilities
$720
EQUITY
Common stock
$600
Retained earnings
$380
Total equity (net worth)
$980
TOTAL ASSETS
$2042
TOTAL CLAIMS ON ASSETS
$2042
Balance Sheet for ABC Engineers Pty (Ltd)
As of 31 December 2022
ASSETS
AMOUNT (Thousands of Dollars)
CLAIMS ON ASSETS
AMOUNT (Thousands of Dollars)
CURRENT ASSETS
CURRENT LIABILITIES
Cash
$50
Accounts payable
$60
Accounts receivable
$200
Notes payable
$100
Marketable securities
$150
Accruals
$10
Stock
$300
Provision for tax
$130
Total Current Assets
$700
Total Current Liabilities
$300
FIXED ASSETS
LONG TERM LIABILITIES
Plant & equipment
$1800
Mortgages
$500
Depreciation
-$500
Debentures
$200
Net plant & equipment
$1300
Total long term liabilities
$700
EQUITY
Common stock
$600
Retained earnings
$400
Total equity (net worth)
$1000
TOTAL ASSETS
$2000
TOTAL CLAIMS ON ASSETS
$2000
2. Mastering Profit and Loss: A Financial Diagnostic Tool for Your Income
In the realm of financial management, the income statement also known as the profit and loss (P&L) statement serves as a diagnostic tool, providing insights into your business’s fiscal health. Analogous to engineers troubleshooting and diagnosing issues in a complex system, the income statement shows the companies revenues and expenses during a particular period. It shows how the revenues are transformed into the net income or net profit.
From revenue and expenses to net profit, uncover the story these numbers tell and how they can guide strategic decisions. By the end, you’ll view your P&L as a powerful diagnostic instrument in your financial toolkit, much like the analytical tools an engineer uses to assess the performance of intricate systems.
ABC Pty (Ltd) Income Statement
For the Year Ended December 31, 2021
Revenues
Amount (Thousands of Dollars)
Sales
1,200
Other Income
50
Total Revenues
1,250
Expenses
Cost of Goods Sold
800
Operating Expenses
300
Depreciation
50
Interest Expenses
30
Total Expenses
1,180
Net Income
70
ABC Pty (Ltd) Income Statement
For the Year Ended December 31, 2022
RevenuesAmount (Thousands of Dollars)Sales1,500Other Income75Total Revenues1,575
Expenses
Cost of Goods Sold
950
Operating Expenses
400
Depreciation
60
Interest Expenses
100
Total Expenses
1,510
Net Income
65
3. Fluid Dynamics of Money – Cash Flow Statements
As someone which understands the intricacies of fluid dynamics or hydraulics you would be in a good position to under liquidity. Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid and Cash Flow Statements(CFS) are used to guage a companies liquidity. Also known as the statement of cash flows, the CFS helps its creditors determine how much cash is available (referred to as liquidity) for the company to fund its operating expenses and pay down its debts.
In the ABC Pty (Ltd) cash flow statement below, the left-hand column represents all sources of funds during the 2021 financial year, while the right-hand column illustrates how these funds were utilised. The positioning (left/right) of individual items is variable and depends on whether they contributed to or consumed funds. Here are the main things you need to look out for and understand in the cash flow statement:
Sources of funds:
Net profit after tax ($120,000): This amount, the final item in the income statement, contributes to the overall funds.
Depreciation ($100,000): Obtained from the income statement as well.
Decreases in working capital led to additional sources of funds, including:
Cash: A reduction from $52,000 to $50,000 indicates a withdrawal of $2,000, serving as a source of funds.
Marketable securities: A decrease from $175,000 to $150,000, representing a $25,000 source of funds from the sale of securities.
Accounts receivable: A reduction from $250,000 to $200,000 results in a $50,000 transfer from debtors to the company.
Stock: Inventory decreased from $355,000 to $300,000, freeing up cash for other uses.
The total source of funds equals net profit after tax + depreciation + total decreases in working capital, totaling $352,000.
Uses of funds:
Increases in working capital led to fund disbursement, including:
Accounts payable: A reduction from $87,000 to $60,000 indicates a repayment of $27,000 to creditors.
Notes payable: Reduced from $110,000 to $100,000, resulting in a $10,000 repayment to the bank.
Income tax: A decrease from $135,000 to $130,000 means a $5,000 payment to the Tax Office to reduce tax liability.
Reduction in long-term debt: Mortgages reduced from $520,000 to $500,000, resulting in a $20,000 payment to the mortgagor.
Gross fixed asset expansion: An increase from $1,610,000 to $1,800,000 indicates a $190,000 expenditure on acquiring assets.
Dividends to shareholders: Of the $120,000 net profit after tax, only $20,000 was retained, with the remaining $100,000 disbursed as dividends.
The total use of funds amounts to $352,000, aligning with the total source of funds.
ABC Pty (Ltd) Cash Flow Statement
For the Period from December 31, 2020, to December 31, 2021
Sources of Funds
Amount (Thousands of Dollars)
Net Profit After Tax
120,000
Increases in Working Capital
Depreciation
100,000
Accounts Payable
27,000
Notes Payable
10,000
Income Tax
5,000
Cash
2,000
Marketable Securities
25,000
Total Increases in Working Capital
42,000
Reduction in Long Term Debt
20,000
Gross Fixed Asset Expansion
190,000
Total Decreases in Working Capital
132,000
Dividends to Shareholders
100,000
Total Sources of Funds
352,000
Uses of Funds
Amount (Thousands of Dollars)
Decreases in Working Capital
Accounts Receivable
50,000
Stock
55,000
Total Decreases in Working Capital
105,000
Dividends to Shareholders
100,000
Total Uses of Funds
205,000
Conclusion
In conclusion, our exploration of financial concepts draws parallels with the precision of engineering blueprints, emphasizing the importance of equilibrium. From the foundational equation Assets = Equities + Liabilities to the nuanced interplay of balance sheets, income statements, and cash flow statements, we’ve navigated the financial landscape. The analogy between financial planning and engineering principles, particularly the application of the right-hand rule, underscores the need for meticulous balance to ensure stability.
Specifically, in understanding cash flow statements, we likened financial sources and uses to the carefully orchestrated forces in engineering. Much like engineers balance forces for structural integrity, businesses must judiciously manage their sources and uses of funds for sustained financial health. As we conclude, embrace this equilibrium, strategically apply financial principles, and steer your business toward resilience and prosperity. Below are some books that can assist you on your way to understanding finance and accounting as an engineer, technician or technical professional.
In his recent interview on the Munro Live Youtube Channel Elon Musk alluded to the need for Engineers to turn to managing businesses as a part of their roles – this is because taking full advantage of a business process requires efficiency and as a result technical excellence in business is becoming a necessity rather than the luxury it once was. Efficiency is the one common concept that all Engineers are trained in so I thought to write on the one topic that Engineers are trained on the least – Business Communication. The reason for this is that there is a general definition of soft and hard skills; with technical skills involving maths, science and tech being on the hard side and sales, communication and marketing being on the soft side. However, with the onset of digital communication these definitions should be done away with!
Communication plays a vitally important role for any Engineer intending to become an effective business leader. Communication is part of the process in any job and it is frequent and critically important for any operation. It can make the difference between success and failure for an organization or individual and that is why it is so important for Engineers to understand the importance of communication.
“The way we communicate with others and with ourselves ultimately determines the quality of our lives” – Anonymous
Photograph by Tim Rue — Bloomberg via Getty Images, 2015.
Why communication skills are critical for Engineers?
The Oxford Dictionary defines communication as the imparting or exchanging of information by speaking, writing, or using some other medium. Another definition communicates this more effectively by defining it as: the process of passing any information from one person to the other person with the aid of some medium. To understand the importance of communication consider the following scenario. Lerato works as a Design Engineer with a top Petrochemical Company. She was requested to give a presentation on the assignments she has undertaken in the past 12 months and her achievements. Her appraisal was due that same month, and she did not get a promotion. And what was the culprit to missing out on a bigger paycheck? Her presentation! This was all because of her not being clear in expressing her thoughts even though her design drawings and reports were those of a talented Engineer. However, because she could not express her views in front of her boss and the top management, she lost out on a golden opportunity.
Engineers need to good at presenting their ideas and designs.
Engineers need to be able to clearly present their work in order to succeed in industry.
The most important thing that Engineers need to understand when it comes to communication is that graphical or technical communication is done in order to mitigate errors or minimise the possibility of mistakes – this is drilled into every Engineering student right from your first day in class. In contrast Business Communication is carried out in order to maximise or increase the possibility of success and this is something which you need to drill into yourself. To the Engineer, the importance of communication lies in making a mind shift from minimising errors to maximising success. If you see communication as a means to succeeding you will realise that is the difference between getting the funding to build your design, securing that tender or getting your professional registration.
