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Managerial finance
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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.
Managerial finance is an interdisciplinary approach that borrows from both managerial accounting and corporate finance.
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.
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Encyclopedia
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.
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:
See also
- Category:Finance
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