Management Acc Week 5

12 flashcards · Other · by Daniel F.

1. budget

   plan of action over typically a year in financial terms. short-term financial objectives amount of resources needed to achieve these objectives.

2. purposes of budgeting

   Strategy formulation; Resource evaluation, acquisition, and allocation; Delegation and coordination; Control and performance evaluation

3. strategy formulation with budgeting

   Budgeting involves forecasting, goal setting, and strategic planning. help shift focus from day-to-day operations to the future. reveals disagreements and fosters debates about goals, strategies, and tactics. Attention to the future enables managers to anticipate challenges and opportunities. Budgets provide simulations to assess the feasibility of strategic plans. Longer time horizons allow for more flexible resource allocation and preparation for achieving organizational goals. More options a…

4. evaluation, acquisition, and allocation of needed resources with budgeting

   Resource Evaluation: amount of resources the organization will need to run its operations resource acquisition has to be planned in advance because it takes a long time They reveal future needs for resources, temporary or permanent cash shortages or excesses early enough Resource Acquisition: Budgets allow organizations to justify their need for additional resources to investors negotiate with investors the conditions of acquisition of these additional resources based on expected risks and retu…

5. delegation and coordination with budgeting

   budgets help reduce the risks of some managers undoing what other managers have done and increase the chances that their actions reinforce each other

6. control and evaluation with budgeting

   budget is a benchmark against which actual performance can be compared to assess whether goals were achieved or whether some corrective action should be taken budget is a way to set S.M.A.R.T. (Specific, Measurable, Ambitious, Realistic, and Time-bounded) goals for managers budget can orient, influence, and sometimes constrain managers’ decisions and actions is extremely powerful

7. steps of the budgeting

   strategic plan - top management’s long term vision operational budget sales budget - expected sales volumes for the different products and services of the company production budget - budget based on capacity and sales budget procurement budget - productions need of raw materials administrative budget capital budget - budget allocating money for the acquisition or maintenance of long-term assets such as land, buildings, and equipment financial budget cash budget - estimation of the cash flows of…

8. sales budget

   income statement blue cash flow statement red balance sheet green

9. production and procurement budget

   income statement blue cash flow statement red balance sheet green

10. criticisms against budgeting

    They are costly to implement and subject to rapid obsolescence; takes long time so costly They create organzational inertia and cause missed business opportunities; excessive emphasis on meeting the budget under all circumstances diverts managers’ attention away from unexpected (and therefore not budgeted) opportunities They foster dysfunctional behaviors among managers meeting the budget becomes more important than doing what is actually good for the organization Budget gaming behaviors - a se…

11. making budgeting better

    participative budgeting authoritative budgeting authoritative budgeting: budget is imposed consultative budgeting input is taken into consideration participative budgeting everyone works together continuous budgeting budget is changed frequently to reflect reality zero based budgeting budget is remade every year balanced storecard - combat gaming reward managers not only based on budget benchmarking, relative performance evaluation

12. beyond budgeting

    continuous budgeting - 12 month rolling forecasts reward managers with balanced storecard - combat gaming reward managers not only based on budget benchmarking, relative performance evaluation 3. Capital budgeting is very clearly separated from operational budgeting for a more dynamic, flexible and responsive resource allocation.