4 PART 1 Introduction to Managerial Finance
finance
The art and science of managing
money.
financial services
The part of finance concerned
with the design and delivery of
advice and financial products to
individuals, business, and
government.
managerial finance
Concerns the duties of the finan-
cial manager in the business
firm.
financial manager
Actively manages the financial
affairs of any type of business,
whether financial or nonfinan-
cial, private or public, large or
small, profit-seeking or not-for-
profit.
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WLG1 1.1 Finance and Business
The field of finance is broad and dynamic. It directly affects the lives of every per-
son and every organization. There are many areas and career opportunities in the
field of finance. Basic principles of finance, such as those you will learn in this
textbook, can be universally applied in business organizations of different types.What Is Finance?
Financecan be defined as the art and science of managing money. Virtually all
individuals and organizations earn or raise money and spend or invest money.
Finance is concerned with the process, institutions, markets, and instruments
involved in the transfer of money among individuals, businesses, and govern-
ments. Most adults will benefit from an understanding of finance, which will
enable them to make better personal financial decisions. Those who work in
financial jobs will benefit by being able to interface effectively with the firm’s
financial personnel, processes, and procedures.Major Areas and Opportunities in Finance
The major areas of finance can be summarized by reviewing the career opportu-
nities in finance. These opportunities can, for convenience, be divided into two
broad parts: financial services and managerial finance.Financial Services
Financial servicesis the area of finance concerned with the design and delivery of
advice and financial products to individuals, business, and government. It
involves a variety of interesting career opportunities within the areas of banking
and related institutions, personal financial planning, investments, real estate, and
insurance. Career opportunities available in each of these areas are described at
this textbook’s Web site at http://www.aw.com/gitman.Managerial Finance
Managerial financeis concerned with the duties of the financial manager in the
business firm. Financial managersactively manage the financial affairs of any
type of businesses—financial and nonfinancial, private and public, large and
small, profit-seeking and not-for-profit. They perform such varied financial tasks
as planning, extending credit to customers, evaluating proposed large expendi-
tures, and raising money to fund the firm’s operations. In recent years, the chang-
ing economic and regulatory environments have increased the importance and
complexity of the financial manager’s duties. As a result, many top executives
have come from the finance area.
Another important recent trend has been the globalization of business activ-
ity. U.S. corporations have dramatically increased their sales, purchases, invest-
ments, and fund raising in other countries, and foreign corporations have likewise