Learning Financial Management without Financial Mathematics

BUDI FRENSIDY, Investment Advisors and Financial Mathematics Books Author] A user of my book to ask, what is the difference of financial mathematics and financial management? Basic questions like this quite often I have received. For that, it would not hurt this time I discuss this simple issue.
I will start from financial management. This is the science that must be studied students at the faculty of economics. In business schools or departments of management, financial management is almost certainly due to the concentration or favorite specialty field promises a broad and diverse work.
Finance scholars can easily fill financial positions in all government offices, private, multinational, and nonprofit organizations ranging from banking and other financing until the profession in the capital market. Indeed, financial scholars are more prepared to work at multinational companies and large private companies (corporations).
This is because the text books used are corporate finance most of whom come from America. This book teaches how to manage the finances of a corporation who have access to capital markets. There is nothing strange if alternative funding is discussed is stocks and bonds.
The problem, in Indonesia the number of companies that have access to two financial instruments that are still less than 500 units. It is unfortunate if our students do not understand the actual condition of most companies in Indonesia who only have the option to borrow from banks or capital contribution / loan from the owner.
Even more distressing, financial management books written by experts also failed to remind us of this fact because it only refers to the reference books abroad and not the real situation in Indonesia. In contrast with financial management, financial mathematics lesson has not become compulsory in all schools of business and accounting.
Financial mathematics diploma programs are only required for 3 (D-3) finance and accounting, while students strata 1 (S-1) general business and accounting are still being taught mathematical economics. This is because the curriculum of the S-1 in the faculty of economics used to be compiled by a consortium dominated economics economist and professor of the department of economics or development studies. While D3 finance and accounting curriculum created by the financial and accounting experts.
It is unfortunate if the economists do not understand that business and accounting students require a different mathematical economics student. Business and accounting students actually need to help him study the mathematics of financial management, accounting, and investment management.
This is different from economics students who need the math to make it easier to learn the micro and macro economics and econometrics. Another reason is that initially a graduate diploma program is expected to become engineers and financial professionals, while the scholars will be thinkers, researchers, and academics.
This view is certainly no longer valid today as graduates of masters programs were largely incapable of becoming a researcher and drafter as in two or three decades ago. If a dozen years ago who had a master's degree are the managers and officials in major cities, now almost all local officials at level 1 and 2 also hold a MM.
More Relevant
Back to business students and accounting, financial mathematics is actually more relevant to assist them in assessing all financial products and investment bid to make their own financial planning. As a lecturer and author of financial mathematics and mathematical economics, I prefer to say that financial mathematics is Necessary to know for business and accounting students, while the mathematics of economic good to know. You understand the difference between need and good right? Back to differences in financial mathematics and financial management.
First, as economic mathematics for economics, financial mathematics is a language or a tool to understand the science of finance, including financial management.
Second, the equation used in financial management mostly comes from financial mathematics. However, not all financial mathematical equations intended for financial management. Much more useful for investment management and financial accounting.
For example, from 15 equations exist for the present, only 3-4 equation often used in financial management.
Third, if financial management that will be beneficial to their profession in the areas of finance, financial mathematics is useful for anyone who is concerned with personal or family money management.
Basic Financial Logic
Finally, the mathematics of financial management keuanganlah and not laden with the financial logic. With the provision of this capability, you will realize that 0% interest loan is a myth, that the banks / financial institutions a lot of sense in packing products, that the bank product that's not all honey, but there is also a poison (less useful), that it does not repay rarely very burdensome, and that the relationship bank and its customers were asymmetrical. That's some financial math problems in my books.
Which is more interesting, to receive a pension once Rp200 million or Rp1, 5 million every month for life? A manager intends to buy homes with mortgage loans (KPR). If the price of Rp500 million homes and 12% pa interest rate mortgage, how much down payment should be prepared if he wants proper Rp6 million in monthly installments for 120 months? After paying 24 monthly installments, the bank was raising interest rates to 15% pa How big is the new installment?
As the world's richest man, Bill Gates was reported to have wealth of $ 50 billion in early 2010. If his wealth continually grow 16% pa, how much additional wealth per second? I will provide answers to practical questions above and more difficult to discuss the next week. (*)