Managerial Finance

Managerial finance is a term which is a branch of the finance that concerns itself with the managerial significance of finance techniques. Managerial finance encompasses the overall policies and procedures that are associated with corporate finance and management accounting. It focuses on the assessment rather than on technique. The competent management of financial resources within a company or other type of organization, making use of the management structure of the entity as the means of responsibly managing those resources.

Managerial finance covers two areas i.e. the corporate finance and the management accounting. Corporate finance deals with cash flow in and out of the company, debt, inventories and so on. Therefore it includes working capital management and capital investment decisions, such as buying machinery, facilities and other necessities. Management accounting is focused on providing management with the kind of numbers it needs to make good decisions for the company. This accounting is provided to investors, tax authorities and scope, accuracy, speed and compliance.

An example of managerial finance would be a regional sales manager within a company structure who is held accountable for the assets allocated to the region are used in the sales process. The manager use of funds set aside for promotional activities such as participating in trade shows, local chamber events, or even the creation of sales collateral for distribution to prospective clients.

Managers also focus on the need to look at how resources are allocated within an organization. Managers are what each activity costs and why. This requires a managerial accounting techniques such as activity based costing. Managers also need to anticipate future expenses. Managerial finance also seeks to determine the best way to use money to improve future opportunities to earn money and minimize the impact of financial shocks.

Questions:

• What is managerial finance?
• What are the two areas encompassing managerial finance?