What is a budget?
The budgeting process:
-Managers develop strategies and business goals -Companies plan and budget actions. -Next step: To act -After acting: Managers compare actual results with the budgets.
A budget is a plan...
-define targets with an intention to achieve them.
Feedback allows managers to...
...identify corrective action.
With financial budgets, we can find...
...non-financial budgets: -units manufactured -quantities of new products to sell, etc.
A budget is a forecast...
...predictions
Capital Expenditure Budget:
...presents the company's plan for purchasing property, plans, equipment, etc.
Budgets covering financial aspects...
...quantify management's expectations regarding -future turnover -cash flows -financial situation (?)
Three types of budgets:
1.) Operating Budget 2.) Capital Expenditure Budget 3.) Financial Budget
Budgets show the impact of both...
1.) Operating Decisions -acquisition and use of resources, "everyday" decisions 2.) Financial Decisions -how to raise funds to acquire resources.
Budgets are made to...
1.) plan and to take actions 2.) control related revenues and expenses
Cycle
Develop Strategy->Plan->Act->Control
Operating Budget:
Sales Budget, the cornerstone of the budgets WHY? -> Sales effects the other budgets.
Financial Budget:
Where you will find the cash budget, which allows company to anticipate the "cash situation": -Capital expenditure budget -Budgeted balance sheet
Budgets can cover...
financial and non-financial aspects of action by management.
Financial statements usually cover...
past and future periods: -budgeted income statement -budgeted cash-flow statement -budgeted balance sheet.
