Managerial finance

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Corporate finance

Working capital management Cash conversion cycle Return on capital Economic value added Just In Time (business) Economic order quantity Discounts and allowances Factoring (finance)

Capital budgeting Capital investment decisions The investment decision The financing decision Capital investment decisions

Sections Managerial finance Management accounting Mergers and acquisitions Balance sheet analysis Business plan Corporate action

Finance series Financial market Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation

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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? Was generally accepted accounting practice 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.

Contents 1 The Role of Managerial Accounting 2 The Role of Corporate Finance 3 See also 4 References

[edit] 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.

[edit] 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

[edit] See also

• List of finance topics
• Category:Finance

[edit] References

• [http://ocw.mit.edu/OcwWeb/Sloan-School-of-Management/15-414Financial-ManagementSummer2003/Calendar/index.htm MIT Open Courseware - 15.414 Financial Management, Summer 2003. This course focuses on

• 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, Huston Texas, 1967
• Brigham, Eugene and Johnson, Ramon (1980), Issues in Managerial Finance, Holt Rinehart and Winston Publishers, Hindale Illinois, 1908