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The Managerial Finance Function Since most business decisions are measured in financial Managerial Finance is closely related to, but quite terms, the financial manager plays a key role in the different from, Economics and Accounting. Organizational View The size and importance of the managerial finance depend on the size of the firm. The Managerial Finance Function Relationship to Economics The Financial Manager must understand the economic framework, and be alert to the consequences of varying levels of economic activity and changes in economic policy Must be able to use economic theories as guidelines for efficient busineness operation?

The Managerial Finance Function Relationship to Accounting The finance and accounting function are closely related and generally overlap; indeed, managerial finance and accounting are not often easily distinguishable. In small firm the controller often carries out of the finance function, and in large firms many accountants are intimately involved in various finance activities Two Basic Differences?

Emphasis of cash flows Accrual Method vs. Evaluating the need for increased or reduced productive capacity Making Investment Decision Making Financing Decision 3. Most appropriate mix of short-term and long-term financing must be established 2. Timing of return and risk 2. Cash flow available to stockholder 3.

Risk Return and risk are in fact the key determinant of share price— which represents the wealth of the owners in the Stockholder are risk-averse? The Managerial Finance Function Goal of The Financial Manager Maximizing Shareholder Wealth The goal of the financial manager is to maximize the wealth of the owners for whom the firm is being managed Timing of return cash flow Measured by the share price of the stock magnitude Risk Financial decisions and share price Increase Financial Financial Decision Return?

Organize Your Finances 2. Spend Less Than You Earn 3. Put Your Money to Work 4. Limit Debt to Income-Producing Assets 5. Continuously Educate Yourself 6. Understand Risk 7. Diversification Is Not Just for Investments 8. Maximize Your Employment Benefits 9.

Pay Attention to Taxes Engelhardt Source: Lucas M. Engelhardt Personal Finances author Stephen J. Skripak Source: Virginia Tech Murali, K. Subbakrishna Source: Himalaya Publishing House Do you want to read about another topic?

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