Overview of Business Finance

Finance

can be defined as the art and science of managing money.

• Financial Services

• Managerial Finance

MAJOR AREAS AND OPPORTUNITIES IN FINANCE

Financial Services

the area of finance concerned with the design and delivery of advice and financial products to individuals, businesses, and governments. It involves a variety of interesting career opportunities within the areas of banking and related institutions, personal financial planning, investments, real estate, and insurance.

Managerial Finance

concerned with the duties of the financial manager in the business firm.

Financial Managers

actively manage the financial affairs of any type of businesses—financial and nonfinancial, private and public, large and small, profit-seeking and not-for-profit.

Marginal Analysis

the primary economic principle used in managerial finance is;

the principle that financial decisions should be made and actions taken only when the added benefits exceed the added costs.

Treasurer

the firm’s chief financial manager, who is responsible for safeguarding and managing the firm’s cash.

Controller

the firm’s chief accountant, who is responsible for the accounting activities.

• Financial Planning and Fund-Raising Manager

• Capital Expenditure Manager

• Cash Manager

• Credit Manager

• Pension Fund Manager

• Foreign Exchange Manager

Organization of the Finance Function: Treasurer

Financial Planning and Fund-Raising Manager

prepares the firm’s financial plans and budgets.

Capital Expenditure Manager

evaluates and recommends proposed long-term investments.

Cash Manager

maintains and controls the firm’s daily cash balances.

Credit Manager

evaluating credit applications, extending credit, and monitoring and collecting accounts receivable.

Pension Fund Manager

oversees or manages the assets and liabilities of the employees’ pension fund.F

Foreign Exchange Manager

manages specific foreign operations and the firm’s exposure to flunctuations in exchange rates.

Cash Flows (Cash Basis)

Financial Managers (Treasurer) evaluate the accounting statements, develop additional data, and make decisions on the basis of their assessment of the associated returns and risks.

Decision Making (Accrual Basis)

Accountants (Controller) devote most of their attention to the collection and presentation of financial data.

Accountant

the primary function is to develop and report data for the preparation of financial statements in accordance with the generally accepted accounting principles.

Financial Manager

This places primary emphasis on cash flows, the intake and outgo of cash. They maintain the firm’s solvency by planning the cash flows necessary to satisfy its obligations and to acquire assets needed to achieve the firm’s goals.