Question

DESCRIBE HOW THE MANAGERIAL FINANCE FUNCTION IS RELATED TO ECONOMICS AND ACCOUNTING

Answer 1

Relation to economics

The macroeconomics environment and micro economics environment influences the financial decisions.

Key economic factors like: -

• Domestic saving rate
• Role of government
• Tax structure
• Growth rate of economy

Impact financial decisions.

The understanding of these factors assist sensitizes the finance manager to the opportunities and threats in the environment.

Also understanding microeconomics also assist in making short term decisions.

Relation to accountancy

The finance and accountancy are closely related. The objective of accounting is to the record the transaction and convert them in analysable form. The finance function take input from this data and assist management to prepare forecast and budgets. The accounting is historic function which provides a base for finance function.