Why study managerial finance?

All major business decisions largely depend on the right management of finances. This is why finance is a crucial function across all organisations, irrespective of industry. Due to its predominant significance, the demand for finance professionals with a management background is on the rise. More students are opting for managerial finance courses to tap into the potential that finance has globally. This article is focused on helping you understand why studying managerial finance is a good idea and whether it is the right option for you. Let’s get to the basics first!

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. 

Why study managerial finance?

• Variety: A financial management course provides students with a diverse set of career paths, despite the course’s small focus. Managerial finance professionals can opt for a job in the public as well as the private sector.

• Rising demand: as the need for efficient financial management increases, so does the demand for managerial finance professionals. Employers today prefer employing candidates with a sound academic background and a degree in financial studies.

• Well-paid: professionals who decide to take up finance roles are paid well, especially if they have the right kind of experience and expertise. As advertised on payscale.com, the average salary of an account manager is about £26,880 per annum.

• Professional and personal growth: taking up a finance role requires you to undertake a wide range of activities such as contributing to financial and business decision making and building strategies for revenue. This will significantly contribute to your professional as well as personal growth, giving you a broader perspective of how to handle business situations.

Career paths in managerial finance

• Commercial, investment and private banks;

• Credit unions;

• Independent financial advising practice;

• Corporate financial management;

• Investment advising;

• Brokerage firms;

• International finance management;

• Insurance firms.

If you have a knack for financial studies and are planning to pursue a financial management course, then you have come to the right place. London School of Business and Finance (LSBF) offers a range of finance-related courses that can steer you in the right direction to build a strong foothold in this field.

LSBF is a centrally located business school in London that offers industry-focused programmes. These programmes are structured to help students understand how the global market works and gets them business-ready for the international marketplace. To find out more about the courses offered by LSBF, click here.

 This article was written by Meghdeep Patnaik and edited by Anisa C.