Importance of Managerial FinanceManagerial finance is important in all types of businesses, including banks (which are just as interested in financial management as are industrial companies). Managerial finance is also important in government operation, from schools to highway departments to health systems. The types of jobs one encounters in managerial finance range from decisions as to whether to undertake major plant expansions to the choice of stock or bonds to finance expansions. Financial managers also have the responsibility for deciding the credit terms granted to customers, how much inventory to stock, how much cash the firm should carry, the specific types of securities to issue, whether to acquire other firms (merger analysis) and how much of the firm’s earning to retain versus to pay out as dividends.
Regardless of which area we go into, success requires a knowledge of the other areas. For example, a banker lending to businesses cannot do his/her job well without a good understanding of managerial finance, because he/she must be able to judge how well the businesses are operated. The same thing for one of Merrill Lynches’ security analysts, and even stockbrokers must have an understanding of general finance principles if they are to give intelligent advice to their customers. At the same time, corporate financial managers need to know what their bankers are thinking about and how security analysts are likely to judge their corporations’ performances and thus influence stock prices.
These days the importance of managerial finance is increasing. Failure of many corporate firms like failure of first public airline company Necon Air Limited, deteriorating performance of the first Nepali public ban, Nepal Bank Limited etc. increase the importance of managerial finance. Most of these organizations are failing due to the improper financial management. Improper financial management arises due to the lack of adequate knowledge in financial decision making in the area of investment, financing, and dividend. The news papers as well as radio and television carry dramatic stories of the growth and decline of firm, corporate takeovers, merger like merger between Laxmi Bank Limited & Hisef Finance Company Limited and many types of corporate restructuring. To understand these developments and to participate in these effectively requires knowledge of the principles of finance and which all provides by managerial finance. Proper financial planning is very important for the long run corporate survival. Such awareness has increased the emphasis placed on the managerial finance function.