Managerial finance is the branch of finance that concerns itself with the managerial significance of finance techniques. It is focused on assessment rather than technique.
The difference between a managerial and a technical approach can be seen in the questions one might ask of annual reports. One concerned with technique would be primarily interested in measurement. They would ask: are moneys being assigned to the right categories? Were generally accepted accounting principles GAAP followed?
One concerned with management though would want to know what the figures mean.
- They might compare the returns to other businesses in their industry and ask: are we performing better or worse than our peers? If so, what is the source of the problem? Do we have the same profit margins? If not why? Do we have the same expenses? Are we paying more for something than our peers?
- They may look at changes in asset balances looking for red flags that indicate problems with bill collection or bad debt.
- They will analyze working capital to anticipate future cash flow problems.
Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance.
Sound financial management creates value and organizational agility through the allocation of scarce resources amongst competing business opportunities. It is an aid to the implementation and monitoring of business strategies and helps achieve business objectives.
Read more about Managerial Finance: Role of Managerial Accounting, Role of Corporate Finance
Famous quotes containing the word finance:
“There is an enormous chasm between the relatively rich and powerful people who make decisions in government, business, and finance and our poorer neighbors who must depend on these decisions to alleviate the problems caused by their lack of power and influence.”
—Jimmy Carter (James Earl Carter, Jr.)