Budgeting, Financial Management

Assignment Help:

Budgeting:

All business owners should recognise and understand the importance of preparing and maintaining a financial budget for their business.

Budgets are an essential financial planning tool, a method of control over the day to day operation of the organisation, and an opportunity to involve people at all levels in the budget planning and implementation process.

In many cases of business failure the major contributing factor was the inability of the organisation to either comply with a predetermined budget, or a failure to prepare a budget at all.

Budgets have a number of purposes, including:

  • Assist organisations control financial and overall business results organisation
  • Assist in decision making
  • Aid in coordinating various functions and activities that make up any organisation
  • To assign responsibility to managers or staff for achieving levels of performance, and to authorise amounts that those staff can spend
  • Motivate managers / staff to obtain commitment to achieving budgeted goals
  • Increase the credibility of the organisation in the eyes of third parties

Budgeting and budgetary control can be regarded as a combination of forecasting, planning, and monitoring financial results against plans.

By forecasting aspects of revenue and expenditures (using available information), and then following up with regular comparisons of actual results against budget, managers can determine what action if any should be adopted in order to:

  • Identify and address areas of poor performance
  • Improve areas which are performing well
  • Foresee any need for additional financing
  • Anticipate and plan for growth and/or changes in business circumstances

Related Discussions:- Budgeting

What is the maximum additional short-term funding, B.J. Industries has a cu...

B.J. Industries has a current ratio of 2.5, with $2.5 million in current assets.  Due to sales growth, the company wants to expand accounts receivable and inventories by

Calculation of weighted average cost of capital, Calculation of Weighted Av...

Calculation of Weighted Average Cost of Capital The calculation of weighted cost of capital involves the following steps: (i) Calculate the cost of each source of funds.

Absolute performance standard, Absolute Performance Standard is a method of...

Absolute Performance Standard is a method of measuring an organization's development and how effective and efficient it is at operating its business. The absolute performance stand

Example to show the companys current gearing, Q. Example to show the compan...

Q. Example to show the companys current gearing? The company's current gearing 2000/ 8500 × 100 = 23.53% The current gearing position is on the low side particularly wh

What is the meaning of statement- earn out arrangements, What is the meanin...

What is the meaning of statement- Earn out arrangements These arrangements take place during acquisition of another company. Parent company agrees to pay additional money if

Panera bread company, Analysis of the financial statements and accounting p...

Analysis of the financial statements and accounting policies of "Panera" Bread company, in APA format, containing: Financial Statements -Discuss the main financial statemen

Margin trading, Margin Trading: Suppose an investor wants to buy 100 Re...

Margin Trading: Suppose an investor wants to buy 100 Reliance Energy shares, whose market price is Rs.500. This transaction requires Rs.50,000 but the investor has only Rs.30,0

Distinguish between diversifiable and non-diversifiable risk, Question: ...

Question: (a) An efficient financial market is assumed to hold under the Capital Asset Pricing Model (CAPM). What is the main hypothesis of an efficient financial market? (

What does weighted average cost of capital, What does the "weight" refer to...

What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd