Managerial economics plays an important role in equipping the financial manager with the tools that are necessary for taking financing and investing decisions. Managerial economics help financial manager to take effective decisions regarding pricing of products, allocating costs to the products, calculating market equilibrium to determine the demand and supply of the products produced by the firm. It enhances the financial manager's cognitive ability by discounting the future cash payments for evaluating the choice for making investments in more than two alternatives. Financial managers use various methods such as game theory, price bundling, Net Present Value, theory of the firm etc to take decisions which directly affect the company's market share and profitability.
