Summary

Finance is the science and art of managing money. It affects virtually all aspects of business.
Managerial finance is concerned with the duties of the financial manager working in a business.
Financial managers administer the financial affairs of all types of businesses— private and
public, large and small, profit seeking and not for profit. They perform such varied tasks as
developing a financial plan or budget, extending credit to customers, evaluating proposed large
expenditures, and raising money to fund the firm’s operations.
The goal of the firm is to maximize its value and therefore the wealth of its shareholders.
Maximizing the value of the firm means running the business in the interest of those who own it
—the shareholders. Because shareholders are paid after other stakeholders, it is generally
necessary to satisfy the interests of other stakeholders to enrich shareholders.
All areas of responsibility within a firm interact with finance personnel and procedures. The
financial manager must understand 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. The primary activities of the
financial manager, in addition to ongoing involvement in financial analysis and planning, are
making investment decisions and making financing decisions.