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26 Cards in this Set
- Front
- Back
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forecasts
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involves estimating future sales revenue, costs, and profits
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time series
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data that covers a period of time so that trends can be observed
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budget
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a forecast of cost and revenue
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functions of budget
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🐰mapping
🐰controlling 🐰communicating 🐰instructing 🐰authorizing 🐰performance measuring |
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types of budget
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sales budget
expenditure budget profit budget |
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sales budget most important
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it is the forecasting of sales for the period both on quantity and in value.
TAKE INTO CONSIDERATION _competitors _advertising budget _sales force effectiveness |
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expenditure budget
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sets a maximum target for costs that a manager or department can spend over a period of time
Aim: control cost (managers do not spend over the budget and they are under spending) |
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profit budget
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it sets a minimum figure for the profit to be achieved over a period of time (function of both income and expenditure budget)
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budgeting techniques
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fixed budgeting system
flexible budgeting system zero-based budgeting system |
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fixed budgeting system
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GH j D's RJ has else
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flexible budgeting system
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budget that is designed to change in accordance with the activity level attained
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zero-based budgeting system
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managers responsible will justify the money they require.
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advantages of ZBB
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⛪questioning attitude - reduce unnecessary costs and inefficient practices
⛪staff motivations evaluation skills are practiced ⛪encourage managers to look for alternatives. |
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disadvantages of ZBB
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🔰time consuming
🔰skillful decision making is required 🔰it threatens the status quo 🔰managers may not be prepared to justify 👘spending on certain costs |
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constraints in preparing budgets
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👒use of planner figures questions their accuracy
👒difficult to collect information that required for budgeting 👒conflicts may arise when the available finds are limited |
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advantages of budgets
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👑provide a means of controlling income and expenditure
👑act as a review of the business allowing time for corrective action 👑emphasis and clarify the responsibilities of the exceutives |
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disadvantages of budgets
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👓lead to resentment from some personnel
👓if inflexible business might suffer 👓if actual business results are different from the budgeted ones it can lose its importance |
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variance
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difference between the business has budgeted and the actual figure.
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favorable variance
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business enjoy higher profits than budgeted
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adverse variance
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when the actual figures ate worse than thebudgeted figures
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management by exception
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name given to the process of focusing on activities that require attention and ignoring those that appear to be running smoothly.
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cash flow
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refers to the money coming into the business and going out of the business as expenses.
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cash flow statemwnt
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a financial statement which shows sources and uses of cash in a trading period
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cash flow forecast
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a forecast that informs the management of the business plans, prospects for cash inflows, and cash outflows over a period of time
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adv of cash forecast
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monitoring cash flow
identifying the timing of cash shortages and surpluses supporting applications for funding enhancing the planning process |
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limitations of cash flow forecast
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difficult to predict costs accurately
unforeseen changes are not considered time consuming and requires expertise and research |
