Financial management
lastmod 2023-06-20created 2023-06-202 edits
Financial management
The discipline that studies the theory of raising funds and managing them efficiently in a company's business activities. Accordingly, the goal of financial management is to maximize the value of the company by raising funds at a low cost of capital and investing those funds in highly profitable investment proposals.
That said, modern financial management covers a broader scope. It still focuses on corporate fund-raising and the issuance of stocks/bonds, but you can think of it as covering every finance-related area of business administration not included in another field. In the first place, the word finance itself carries not only the meaning of corporate finance but also the broader meaning of finance in general.
The awkward thing about learning financial management is that, whereas other disciplines such as economics or accounting let you learn the basic theory in an easy and fun way, financial management is a feast of mathematics and statistics from start to finish.The graveyard of liberal-arts majors While other disciplines let you approach the theory without tools like mathematics or statistics when you first encounter them, financial management is all mathematics and proofs from beginning to end, so for business administration students who are not usually on good terms with math it is a course seen as something like the final boss of business administration. Perhaps for this reason, students who cleared many math courses while preparing to study abroad and took all the advanced economics courses and econometrics with good grades sometimes sweep up top grades. Of course, depending on the school, some courses exclude math and statistics as much as possible and just tell students to memorize the basic formulas of the MM basic propositions or the formulas of the Black–Scholes model, so students simply memorize and solve problems, while some professors use Excel and statistics programs to prove the theory in great detail or have students practice, at least roughly, the models used in practice. Based on corporate financial management, undergraduate programs sometimes open separate courses such as investment theory, which covers futures, options, swaps, international financial management, and so on.
Sometimes a PhD in financial management goes on to become a professor in an economics department and teaches financial economics or money and banking. Strictly speaking, finance is in some respects closer to economics than to other areas of business administration. It even overlaps with public finance once you include taxes, which simple models do not cover but which have to be dealt with in reality. At the doctoral level there are many areas where the boundaries between financial management, financial economics, and financial engineering become blurred. Of course, compared with financial economics or financial engineering, finance in business administration does tend to focus more on corporate finance and on financial decision-making within companies.