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Managerial finance is the branch offinance that concerns itself with the financial aspects of managerial decisions.Finance addresses the ways in which organizations (and individuals) raise and allocate monetary resources over time, taking into account the risks entailed in their projects;Managerial finance, then, emphasizes themanagerial application of thesefinance techniques and theories.[citation needed]
The techniques assessed (and developed) are drawn in the main frommanagerial accounting andcorporate finance; the former allow management to better understand, and hence act on, financial information relating to profitability and performance; the latter are about optimizing the overall financial-structure;seeFinancial management § Role.
In both cases, the discipline addresses these from the Managerial perspectives of Planning, Directing, and Controlling;[citation needed]here in the more specific context ofstrategic planning, organizing, directing,and controlling of the organization'sfinancial undertakings.
Academics working in this area are typically based inbusiness school finance departments, in accounting, or inmanagement science.
Management accounting techniques are applied in the preparation and presentation of financial and other decision oriented information "in such a way as to assist management in the formulation of policies and in the planning and control of the operation undertaking".The analytics here are thus concerned with forward-looking decisions, as opposed to the historical and compliance perspective offinancial accounting.
Undertaking these tasks, financial managers use variousmanagement accounting andfinancial analysis techniques to accurately assess the results and performance of the business lines and units, and to monitor resource allocation within the organization; this includesprofitability analysis andcost analytics – employing techniques such asactivity based costing,whole-life cost analysis,cost–volume–profit analysis, andvariance analysis – as wellbudget analytics more generally.(See alsocash flow forecast andfinancial forecast.)
Managerial finance is, as above, also focused on the overall financial-structure of the business, including its realized impact on cash flow and profitability. It is thus interested in long-term revenue / business optimization, while also minimizing the potential impact of any financial shocks on short term performance. To accomplish these goals, managerial finance addresses techniques utilized inCorporate finance, usually organized re the following:
The discipline also considers the variousapplications of risk management here.
