Financial Management and Analysis
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Financial Management and
Analysis
FRANK J. FABOZZI
PAMELA P. PETERSON
Finance is the application of economic principles and concepts to busi-
ness decision-making and problem solving. The field of finance can be
considered to comprise three broad categories: financial management,
investments, and financial institutions:
■ Financial management. Sometimes called corporate finance or busi-
ness finance, this area of finance is concerned primarily with financial
decision-making within a business entity. Financial management deci-
sions include maintaining cash balances, extending credit, acquiring
other firms, borrowing from banks, and issuing stocks and bonds.
■ Investments. This area of finance focuses on the behavior of financial
markets and the pricing of securities. An investment manager’s tasks,
for example, may include valuing common stocks, selecting securities
for a pension fund, or measuring a portfolio’s performance.
■ Financial institutions. This area of finance deals with banks and other
firms that specialize in bringing the suppliers of funds together with the
users of funds. For example, a manager of a bank may make decisions
regarding granting loans, managing cash balances, setting interest rates
on loans, and dealing with government regulations.
No matter the particular category of finance, business situations that
call for the application of the theories and tools of finance generally
involve either investing (using funds) or financing (raising funds).
Managers who work in any of these three areas rely on the same
basic knowledge of finance.
Analysis
FRANK J. FABOZZI
PAMELA P. PETERSON
Finance is the application of economic principles and concepts to busi-
ness decision-making and problem solving. The field of finance can be
considered to comprise three broad categories: financial management,
investments, and financial institutions:
■ Financial management. Sometimes called corporate finance or busi-
ness finance, this area of finance is concerned primarily with financial
decision-making within a business entity. Financial management deci-
sions include maintaining cash balances, extending credit, acquiring
other firms, borrowing from banks, and issuing stocks and bonds.
■ Investments. This area of finance focuses on the behavior of financial
markets and the pricing of securities. An investment manager’s tasks,
for example, may include valuing common stocks, selecting securities
for a pension fund, or measuring a portfolio’s performance.
■ Financial institutions. This area of finance deals with banks and other
firms that specialize in bringing the suppliers of funds together with the
users of funds. For example, a manager of a bank may make decisions
regarding granting loans, managing cash balances, setting interest rates
on loans, and dealing with government regulations.
No matter the particular category of finance, business situations that
call for the application of the theories and tools of finance generally
involve either investing (using funds) or financing (raising funds).
Managers who work in any of these three areas rely on the same
basic knowledge of finance.
