1. Concepts and Definitions
   1. Fixed Costs
   2. Variable Costs
   3. Sunk Costs
   4. Opportunity Costs
   5. Avoidable Costs
   6. Expected Value
   7. Economic Life and Obsolescence
   8. Depreciation
      1. Straight-Line Method
      2. Sum-of-the-Years' Digits (SYD) Method
      3. Declining-Balance Method
      4. Double-Declining Balance-Method
      5. Depreciation-By-Use Method
         
         
2. Activity-Based Costing
   
   
3. The Effects of Taxes
   
   
4. Choosing Among Investment Proposals
   
   
5. Determining the Cost of Capital
   
   
6. Interest Rate Effects
   1. Compound Value of a Single Account
   2. Compound Value of an Annuity
   3. Present Value of A Future Single Payment
   4. Present Value of An Annuity
   5. Discounted Cash Flow
      
      
7. Methods of Ranking Investments
   1. Net Present Value
   2. Payback
   3. Internal Rate of Return
   4. Ranking Investments with Uneven Live

Financial analysis tools and concepts are important for OM. These tools include the types of costs, risk, and expected value, and depreciation. When the focus of OM decisions is capital investment, issues of cost-of-capital calculations and even activity-based costing are important.

Fixed costs are any expenses that remain constant regardless of the level of output of production. Variable costs, conversely, vary directly with changes in output levels. Sunk costs are past expenses or investments that have no salvage value and therefore should not be taken into account when considering investment alternatives. Opportunity costs are the benefits lost that result from choosing one action over another action. Avoidable costs are expenses not incurred if an investment is made but that must be incurred if the investment is not made. Expected value is the sum of expected outcomes multiplied by the probability of their occurrence. Expected values result because there is risk inherent in any investment decision.

The life of a machine or other income-producing assets is estimated and for accounting purposes, the asset is depreciated over this period. Depreciation is a method for allocating costs of capital equipment. Methods of depreciation include the straight-line method, the sum-of-the-years' digits method, the declining-balance method, the double-declining -balance method, and the depreciation-by-use method.

Activity based costing is am important accounting concept for OM and it is the practice of allocating overhead to better reflect actual proportions of overhead consumed by the production activity. Causal factors or cost drivers are identified and are used as the basis for overhead allocation as direct labor is not the best basis for allocating all overheads.

When choosing among investment proposals, investments are generally ranked according to the return they yield in excess of their cost of capital. Investment decisions can include the purchase of new equipment or facilities, replacement of existing equipment or facilities, make-or-buy decisions, lease-or-buy decisions, temporary shutdowns or plant abandonment decisions, or the addition or elimination of a product or product line.

Other financial decisions include determine the cost of capital, tax issues, and interest rate effects on OM decisions. Ways to rank investments include the net present value method, payback period, and the internal rate of return.