Why Study Managerial Finance?
Managerial finance is an integral part of business management and critical to all businesses. It contributes significantly to the decision-making process and the overall productivity of an organization. This has led to an increase in the number of opportunities available for managerial finance professionals.
If you are planning to pursue a career in finance, this blog will help you understand its various aspects in detail.
What is managerial finance?
Managerial finance refers to the branch of finance concerned with the impact of financial techniques, such as trend analysis, income statements and comparative financial statements, on business management. The focus of financial management is on the assessment of financial techniques and maximising profits, which subsequently influences the financial growth of stakeholders.
Key concepts of managerial finance
Managerial finance plays an important role in the functioning of a business. Four key concepts serve as the fundamentals of financial management. Let’s take a look:
- Cash management: the cash management function aims at ensuring that an organisation has sufficient resources to meet its financial obligations. Financial resources are essential for a business to run smoothly. A cash deficit could adversely affect the operations and image of an organisation. Effective cash management contributes significantly to a firm’s growth. The financial obligations must be fulfilled on time and without any foul play.
- Financial reporting: financial decision-making largely depends on the accurate and detailed reports that present key pieces of information. The information should be cited in a format that is useful to the management and easy to decipher in order to derive necessary data from the reports.
- Planning and predicting: this is a critical component of managerial finance which requires professionals to implement planning strategies. These strategies are used to forecast the company’s budget, revenue to be generated, future expenses and profits. In case the aforementioned parameters do not perform as per the predictions, it indicates that changes in strategies must be executed. This will help the company to perform in accordance with the financial predictions and planning.
- Capital: managerial finance is responsible for determining the best type of capital to fund the venture – debt, equity or both. It is also responsible for determining how much fund will be required and when. The capital structure is essential to a company’s growth and can be obtained through equity shares or other financial institutions.
Importance of managerial finance
Managerial finance is responsible for taking decisions that directly affect the profits, cash flow and revenue generation. It plays a significant role in a company’s growth, let’s find out how!
- Business life cycle: It is essential that the business has enough cash at all times to fulfill financial commitments made to the employees and suppliers. This means, accurate predictions about possible negative cash flow should be made in order to be prepared for an unprecedented event. Managerial finance also contributes to the decision of fund expansion and finding the appropriate source of funding.
- Taxation: the aspect of managerial finance in a company also ensures that taxes are paid on time. Not paying taxes timely can affect the growth of the business.
- Operations: an organisation has a series of financial operations to take care of. Managerial finance ensures that the revenue generated is used profitably. Financial management professionals need to ensure that the revenue generated flows through an organisation’s operations efficiently and is readily available to buy raw materials, assist sales strategies and fulfill financial commitments.
- Reporting: financial reporting is imperative in order to make managerial finance an effective section of the business. Financial reports are indicators of the performance of different sections in a business. These reports also assist in financial decision-making and predicting financial parameters that are critical to the business.
Why should you study managerial finance?
Before deciding on which career to pursue, it is important that you understand how it will influence your professional growth and whether it is the best fit for you. Here are some reasons why you should pursue finance courses.
- It has a narrow focus and yet, it is a diverse career. Managerial finance is a part of the business dynamics which has dense job opportunities. Pursuing a career in managerial finance increases your employability rate, giving you an edge over your contemporaries.
- It plays a major role in enhancing your personality and professional growth. It includes a wide range of activities, starting from assisting business decision-making to driving revenue generation. This means you can dip your toes in a series of activities that will increase your bandwidth in terms of understanding business activities.
- Managerial finance is a rewarding career, in terms of remuneration. As per payscale.com, the average salary of a financial manager is about £38,773 per year.
Careers in managerial finance
The various areas you can work in if you take up a finance degree are given below:
- International finance management;
- Insurance companies;
- Brokerage firms;
- Investment and commercial banks;
- Private banks;
- Investment services;
- Financial planning services;
- Credit unions.
If you are planning to pursue a finance course, then you should go for a business management degree that entails the concepts of managerial finance as a core subject. Berlin School of Business and Innovation (BSBI) offers the Global MBA course which helps you understand the importance and application of managerial finance in business. To know more about the courses offered by BSBI, click here.
This text was written by Meghdeep Patnaik and edited by Anisa Choudhary.