Question

How does the field of finance integrates with the concepts of accounting and economics.

Answer 1

Field of finance is integrating with the concept of accounting and economics as follows-

A. Financial decisions are often based upon incorporation of economic policies and economic situations as when the finance manager will be making decisions regarding raising of the finance of the company and increasing the rate of return of the company then he will be considering various underlying economic factors like monetary policy which is determined by the central banks along with the interest rates in the economy and he will also be determining the inflation in the economy and he can even determine the exchange rate which are prevalent between different nation if he has to raise the money from outside the domestic territory, so he will always consider the underlyi the economic condition before deciding upon a financial decision because it will be affecting the rate of return of the company as the cash flow will be getting impacted due to economic condition and the growth rate of the project and the company will also be getting impacted due to the changing economic scenario.

B.The field of finance will also be integrated with the concept of accounting because the accounting is helping the financial managers in order to go through the books of accounts and look up on the quantitative ratios and other Assets and liabilities which will be providing a better estimation about the accounting position of the company and it will be incorporated in the financial decision making because these are the raw data which can be used in different manner by the financial department so accounting informations and accounting concepts will be helping in better decision making as there will be applicability of accounting rules and regulation before making a financial decision and underlying accounting principle will be guiding this financial managers in achieving a higher rate of return.

Hence, the field of finance will be integrated with the concept of the accounting and the economics and there must be a better synchronisation between all these factors in order to maximize the rate of return of the company