- [Earl] Some of the well-known products invented
in DuPont's laboratories include Nylon,
which was accidentally discovered
when DuPont's chemists were seeing
how far they could stretch polyester fibers,
Teflon and Silverstone, which are non-stick finishes,
Kevlar, which is used in bulletproof vests,
and Lycra, which is a spandex fiber.
Over 100 years ago, an accountant at DuPont,
F. Donaldson Brown, created a way for a company
to compare operating performance
in various different divisions.
Well, DuPont was a vertically-integrated company,
and management often had to compare
really different projects.
For example, they would have to decide whether
to spend money to improve their manufacturing processes
to lower costs, or to use that same money
to streamline their purchasing process
so they could hold less inventory.
- [Jim] Brown was trained as an electrical engineer
and he used his mathematical insight to show
that measures of sales profitability
and of operating efficiency could be combined
into one overall measure of Return on Investment.
- As a result, projects with vastly different effects can
be compared based on their impact on Return on Investment.
Brown's insight has been refined over the years,
but it is still a fundamental part of business analysis.
- Now F. Donaldson Brown's techniques
for evaluating multi-divisional enterprises were
transplanted from DuPont to another company when,
in 1920, a member of the DuPont family took over leadership
of a struggling car manufacturing company,
named General Motors.
- This is a classic example of the application
of managerial accounting.
An organization sees a need for better planning,
control, and evaluation of its operations.
- People within the organization consider
their information needs, create new measures
that summarize important aspects of their operations,
and proceed to make better decisions.
- [Earl] That is managerial accounting.
Information tailored to an organization's specific needs
to help that organization better plan, control,
and evaluate its operations.