The field of finance is closely related to economics and accounting, and financial managers need to understand the relationships between these fields. Economics provides a structure for decision making in such areas as risk analysis, pricing theory through supply and demand relationships, comparative return analysis, and many other important areas. Economics also provides the broad picture of the economic environment in which corporations must continually make decisions. A financial manager must understand the institutional structure of the Federal Reserve System, the commercial banking system, and the interrelationships between the various sectors of the economy. Economic variables, such as gross domestic product, industrial production, disposable income, unemployment, inflation, interest rates, and taxes (to name a few), must fit into the financial manager’s decision model and be applied correctly. These terms will be presented throughout the text and integrated into the financial process.

Accounting is sometimes said to be the language of finance because it provides financial data through income statements, balance sheets, and the statement of cash flows. The financial manager must know how to interpret and use these statements in allocating the firm’s financial resources to generate the best return possible in the long run. Finance links economic theory with the numbers of accounting, and all corporate managers—whether in production, sales, research, marketing, management, or long-run strategic planning—must know what it means to assess the financial performance of the firm.

Many students approaching the field of finance for the first time might wonder what career opportunities exist. For those who develop the necessary skills and training, jobs include corporate financial officer, banker, stockbroker, financial analyst, portfolio manager, investment banker, financial consultant, or personal financial planner. As the student progresses through the text, he or she will become increasingly familiar with the important role of the various participants in the financial decision-making process. A financial manager addresses such varied issues as decisions on plant location, the raising of capital, or simply how to get the highest return on x million dollars between 5 o’clock this afternoon and 8 o’clock tomorrow morning.