Finance in Economics and Accounting
The field of finance is closely related to economics and accounting and financial management need to clearly understand the relationships between these fields.
Finance and Economics Finance may be viewed as a form of applied economics. Economic theories provide insights into the institutional structure:- banking system, financial intermediaries, federal and state treasures and the interrelationships between the various sectors of the economy. Economics provides a structure for decision making in such areas as pricing theory through supply and demand relationships, risk analysis, comparative return analysis and other important areas.
It also provides the broad picture of tye economic environment in which corporations must continually make decisions. Economic variables such as disposable income, gross domestic products, interest rates, inflation, unemployment, taxes etc, must fit into the financial manager's decision model and be correctly applied.
Finance and Accounting Accounting provides financial data through income statements, balance sheets, and the statement of cash flows which are used in assessing the financial position of firm. Finance on it's part evaluates, analyses the financial data, develops insights and based on the result of the analyses, allocates the firm's financial resources to generate the best return possible.
Finance links economic theory with the accounting data, and all corporate managers, whether in marketing, management, production, research, sales or long term strategic planning, must know what it means to assess the financial performance of the company.
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