finance is often considered a form of applied economics. Firms operate within the economy and must be aware of the economic principles, changes in economic activity and economic policy. Principles developed in economic theory are applied to specific areas in finance. The Primary economic principle used in managerial finance is marginal cost-benefit analysis, the principle that financial decisions should be made and actions taken only when the added benefits exceed the added costs. Nearly, all financial decisions ultimately come down to an assessment of their marginal benefits and marginal cost