Question

Describe the close relationship between finance and economics and explain why the finance manager should possess a basic knowledge of economics . What is the primary economic principle used in managerial finance ? ( 250-300 words)

Answer 1

Monetary and finance matters and management has a cozy relationship to economics from one viewpoint and Accounting g on the other.

There are two significant linkages among financial matters and economics. The macroeconomic condition characterizes the setting inside which a firm works and the miniaturized scale monetary hypothesis gives the applied under sticking to the apparatuses of budgetary choice making.Key large scale financial elements like the development pace of the economy, the residential investment funds rate, the job of the administration in monetary issues, the expense condition, the nature of outside monetary connections the accessibility of assets to the corporate part, the pace of swelling, the genuine pace of premiums, and the terms on which the firm can raise accounts characterize the earth where the firm works. No fund director can stand to disregard the key improvements in the full scale financial circle and the effect of the equivalent on the firm.

A comprehension of the macroeconomics factors in financial matters sharpens the fund administrator to the chances and dangers in nature, a firm establishing in miniaturized scale monetary standards hones his investigation of choice options. Fund, fundamentally, is applied small scale financial matters. For instance the guideline of minimal investigation – a key standard of miniaturized scale financial aspects as per with a choice ought to be guided by an examination of steady advantages and cost is appropriate to various administrative choices in money.