Managerial finance

Corporate finance
Working capital
Cash conversion cycle Return on capital Economic Value Added Just-in-time Economic order quantity Discounts and allowances Factoring
Capital budgeting
Capital investment decisions The investment decision The financing decision
Sections
Managerial finance Financial accounting Management accounting Mergers and acquisitions Balance sheet analysis Business plan Corporate action
Societal components
Financial market Financial market participants Corporate finance Personal finance Public finance Banks and banking Financial regulation Clawback

Accountancy
Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow forecasting · Chart of accounts · Journal · Special journals · Constant item purchasing power accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO and LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax (U.S.)
Financial statements
Balance sheet · Cash flow statement · Statement of retained earnings · Income statement · Notes · Management discussion and analysis · XBRL
Auditing
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
CA · CPA · CCA · CGA · CMA · CAT · CFA · CIIA · IIA · CTP

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.

The Role of Managerial Accounting

To interpret financial results in the manner described above, managers use Financial analysis techniques.

Managers also need to look at how resources are allocated within an organization. They need to know what each activity costs and why. These questions require managerial accounting techniques such as activity based costing.

Managers also need to anticipate future expenses. To get a better understanding of the accuracy of the budgeting process, they may use variable budgeting.

The Role of Corporate Finance

Managerial finance is also interested in determining the best way to use money to improve future opportunities to earn money and minimize the impact of financial shocks. To accomplish these goals managerial finance uses the following techniques borrowed from Corporate finance:

• Valuation
• Portfolio theory
• Hedging
• Capital structure

See also

• List of finance topics
• Category:Finance

References

• Mastering Financial Management, Clive Marsh, Financial Times Prentice Hall, ISBN 978-0-273-72454-4
• MIT Open Courseware - 15.414 Financial Management, Summer 2003.

• Gitman, Lawrence (2003), Principles of Managerial Finance, 10th edition, Addison-Wesley Publishing, 2003, ISBN 0-201-78479-3. [1]
• Weston, Fred and Brigham, Eugene (1972), Managerial Finance, Dryden Press, Hinsdale Illinois, 1972
• Chen, Henry editor, (1967), Frontiers of Managerial Finance, Gulf Publishing, Houston Texas, 1967
• Brigham, Eugene and Johnson, Ramon (1980), Issues in Managerial Finance, Holt Rinehart and Winston Publishers, Hindale Illinois, 1908