According to Siegel, R., & Yacht, C. (2009), the budget process happens to be one aspect of personal financial planning, a tool to make better financial decisions. The rest of the financial tools are comprised of financial statements, assessments of risk and the time value of money, macroeconomic indicators, and microeconomic. What it does is to It place your current situation and your choices into a broad context, giving you a better way to think about where you are, where you’d like to be, and how to go from here to there.
b). What are the components of a comprehensive budget and what is the purpose of each component?
The first step to take …show more content…
Financial History ii. New Information and “Micro” Factors: iii. Economics and “Macro” Factors
Capital Budget deals with Capital Expenditures and Investments.
The capital budget refers to capital expenditures, also known as nonrecurring items. Nonrecurring expenditures may be for increase value in capital such as a new window for your house or buying of durable items such as a refrigerator. These are goods that are purchased that would not be made each period. Capital expenditures involves a longer-term plan. free cash flow: This refers to the remaining income after subtracting living expenses and debt that is obtainable for capital expenditures or investment. Capital expenditures are usually aspect of a long-term plan of structuring an asset base. Investment may also stand as a part of a longer-term plan to structure an asset base or to attain a specific goal such as financing education or retirement. Long-term strategies are based on expected changes to the micro factors that shape goals. Projecting capital expenditures involves using:
i. New information and microeconomic factors ii. Macroeconomic factors, although these are harder to predict for a longer period, and therefore are less relevant iii. The relationships described by the time value of …show more content…
c. How are specialized budgets prepared? What is the relationship of specialized budgets to the comprehensive budget?
Study showcases that budget can be created for that asset or that activity by setting apart its incomes and expenses from your comprehensive budget. By so doing, it is possible to produce such a focused budget only if one can find out and isolate its financial activity from the rest of your financial life.
Tax budget is another type of specialized budget, including activities incomes, expenses, gains, and losses, that have direct tax actions or set of conditions. Prior to that, tax budget can be valuable or productive in planning for or to anticipate an event that will have very important tax set of conditions, for example, income from self-employment; the sale of a long-term asset such as a stock portfolio, business, or real estate.
Fundamentally, specialized budget is usually included in the comprehensive budget, as it is a part of total financial activity. It usually shows one activity in a particular fact, such as the effect of possessing and keeping in good condition a particular asset or of chasing a particular