Managerial Finance – Admission Essay Sample
Managerial finance is the subdivision of finance that involves the managerial importance of finance methods. Rather than technique,managerial finance is dedicated to assessment. The major disparity between a technical and a managerial method is clearly seen in the questions asked regarding financial statements.
Managerial finance is applied by the major shareholders and owners of a firm to establish which areas in the firm the firm need improvement. It also helps to bring out a detailed analysis of the financial health of the corporation. It is also important in that it allows investors to look into the cash flow within the organization. An investor needs to know where his or her money will end up once they invest in the corporation. Managerial finance is essential in determining the working capital of the firm or corporation and therefore estimates the stability of the firm.
Managerial finance mostly involves investigation of financial statements. Comparative ratios of financial statement investigation comprises of income statements that contains outflow detail, balance sheets, cash flow statements, and important commercial and economic ratios. This information helps in determining the well-being of a firm.
There are certain ratios that are important in managerial finance. These include: The liquidity ratio, the asset management ratio, the debt management ratio and the market value ratio. The liquidity ratio which is normally the ratio of the current assets over the current liabilities is used to determine whether a company can meet their short term financial responsibilities.The asset management ratio shows whether the assets of a company are being utilized appropriately. The debt management ratio which is also commonly known as financial leverage ratio will determine the probability of the firm going bankrupt or experiencing financial upheavals in the future. Finally, the market value ratio generally looks into the performance of a company in the stock market.
Based on managerial finance, I believe corporations could stem a considerable percentage of their competitive benefit from trading at a greater margin, instead of heightened sales. Accumulating revenue from sales only, could be risky.