What is managerial finance?

Managerial finance can be defined as the process of

gauging finance techniques to determine how they
can influence a business internally as well as
externally. Managerial finance has two primary
objectives which are:
 Improving financial techniques to contribute to
the organisation’s growth;
 Implementing financial changes to avoid or
reduce losses.
Managerial finance is a mixture of financial
management and corporate financing.
Fundamentals of managerial finance
Managerial finance helps with business decision-
making as it directly influences profits, losses, cash
flow and revenue generation in an organisation. It
contributes to a company’s overall growth
significantly. The four key fundamentals of managerial
finance are:
 Capital structure: organisations employ
managerial finance as an integral business
function to determine three factors that influence
business operations which are:
o   Which capital type is best suited for funding an
endeavour – equity, debt or both;
o   Amount of capital required;
o   Event or time when the capital will be required.
The capital structure of an organisation is key to its
growth and can be acquired either through equity
shares or other financial instruments such as cash
and bond.
 Cash flow: the primary objective of the cash
management function is to ensure that an
organisation has adequate resources to meet the
company’s financial obligations. For a firm to run
smoothly and churn profits, it is essential that the
cash flow is uninterrupted. In the event of a cash
deficit, business operations might get stalled and
this may adversely influence the credibility of the
organisation. Hence, it is important that financial
obligations are met within the stipulated time.
 Plan and forecast: organisations depend on
managerial finance to implement planning
strategies. These strategies are used to predict:
o   Monthly, quarterly and yearly budgets;
o   Expected revenue generation;
o   Future expenses;
o   Expected profits.
While devising strategies, financial management
professionals must be prepared for unprecedented
events. If the aforementioned parameters don’t yield
predicted results, the strategies must be modified to
suit the current situation.
 Financial reporting: financial reporting is a crucial
component of managerial finance, as it
significantly contributes to business decision-
making. Organisations rely on financial reports
for precise and detailed information about the
current situation of the organisation. These
reports must be easy to understand and should
vividly reflect how a particular parameter affects
business operations and functioning.