FINANCIAL MANAGEMENT

Synthesis about The Role of Managerial Finance (Chapter 1)

Finance is defined as the science and art of managing money. It is known as an

expansive and dynamic field. So what does this mean? This means that, learning about it is
not necessarily only for those people who are pursuing to have a career in finance or
business, so regardless of whether you don't see yourself seeking after a finance or business
profession, you'll see that a comprehension of a couple of key thoughts in financial
management will help make you a more brilliant customer and a savvier financial backer
with your own cash.

Focusing about the role of managerial finance in business, it is concerned with the
duties of the financial manager of a company. Financial managers control the monetary
issues of all kinds of organizations—private and public, enormous and little, benefit chasing
and not for benefit. They perform such changed undertakings as building up a monetary
arrangement or financial plan, stretching out credit to clients, assessing proposed enormous
uses, also fund-raising to support the association's tasks. Also, financial management differs
and depends on what legal form an organization is, if it is a sole proprietorship, partnership
or a corporation. Perhaps the most fundamental choices that all organization stands up to
are the way to pick an authoritative document of association. This choice has vital monetary
ramifications since what a business is coordinated legitimately means for the dangers that
the association's proprietors should bear, how the firm can fund-raise, and how the
company's benefits will be burdened.

So now we understand that the essential exercises of the financial manager in

managerial finance, notwithstanding progressing association in monetary examination and
arranging, are settling on speculation choices and making financing choices. That is why the
financial manager must also comprehend the economic environment and rely heavily on the
economic principle of marginal cost–benefit analysis to make financial decisions. Financial
managers use accounting but concentrate on cash flows and decision making. All these
activities practiced and exercised by a financial manager are faced to the primary goal of the
firm, which is to maximize the wealth of the owners for whom the firm is being operated.
Maximizing the wealth of the owners also means maximizing the value of the firm by also
satisfying the interests of other stakeholders of the organization first that is why ethical
behavior is therefore viewed as necessary for achieving the firm’s goal of owner wealth
maximization.

To further relate about the role of the financial managers in an organization; the
division of proprietors and managers of the common firm is illustrative of the work of a
principal-agent relationship, where the investors or shareholders are the directors or
principal and managers are the agents or specialists. This game plan functions admirably
when the managers settles on choices that are in the chief's wellbeing yet can prompt
organization issues at the point when the interests of the head and manager contrast. A
company's corporate administration structure is planned to help guarantee that chiefs act in
the eventual benefits of the association's investors, and different partners, and it is generally
impacted by both interior and outside component.