Managerial finance
The financial industry is part of the economic and business process is divided into investment, financing and risk management. It deals procured a company money capital and the purposes for which it uses these funds to the financial dimension of an enterprise, and in particular the way in which. The procurement of money capital is referred to as financing, while the use of funds for long-term purposes as an investment. This area of business administration is engaged in the procurement of capital resources for business processes and projects and their evaluation, or the evaluation of the entire company. This includes the assessment of equity and debt, as well as mixed forms, but also to answer the question why certain instruments are used to finance.
Important milestones in the development of neo-liberal finance the portfolio theory, the Capital Asset Pricing Model and the option pricing theory, from which the today has developed significant area of risk management. The German Finance Association is in German-speaking central scientific society in the field of finance. Essentially on cost leadership targeting production theory has been pushed back by this development, which essentially was aimed at using engineering- development of the production process to increase the yield.
Traditional view
The traditional view considers the financial processes merely as an auxiliary function: For a given production and sales program certain production capacities are necessary to be built up through investment where appropriate. The capital needs generated by the financing of the investments can be covered by different financing options. The financial industry has therefore primarily the task of selecting appropriate financing options to secure a financial balance. A financial equilibrium requires the ability to pay and the debt coverage ability of a company at any time.
Modern view
In the modern view of all business decisions on the financial objectives will be assessed. Production and sales have commercial importance only because of due to cash inflows and cash outflows. The companies only pursue financial objectives and use are not simply the internal investment opportunities. This will refrain, as soon as there are better external investment opportunities that promise a higher return on investment, business investments.
The financial services industry is usually only a minor function for the smooth functioning of the operations in the real economy dar. Temporal sections in the cyclical economic development, in which the financial sector dominates the processes in the real economy and in which much higher yields can be achieved with money transfer services than by the production and trade of real goods or the provision and use of services may be the harbinger of subsequent economic crises in which the resulting monetary and economic failures are corrected, which were the cause of the dominance of the financial sector.