Budgeting a) Budgeted Profit and Loss account for the year ending 31st March 2012 b) Trading cash budget for the period of six month ending 30th September 2011-12-08 C) Calculation and suggestions for overdraft limit With cash contribution of ?5000 towards operating activities, Nod is facing cash shortfall only in two months out of first 6 months…
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This is because from fifth month Nod will have sufficient cash not only to meet regular cash payments but also Nod will have sufficient cash to return the overdraft. The consideration is also required for capital expenditure that Nod is planning to incur in the beginning of 2nd year. The cost of car is $15000. Nod will generate $3000 on selling an old car and the rest ?12000 will be easily generated out of operation in next six months. This is because cash by the end of September 2011 after paying overdraft of say $800 will be $13150. Each month enough extra cash will be generated to meet $15000 cost easily. Accordingly Nod is advised to negotiate only for an overdraft of $800 in April for a period of four months. Word count: 221 d) Budgeting and business goals Budgeting has become an essential function of any business activity so much in the sense that it becomes easy to attain the purposes for which the business activity is planned for. In fact management plans to achieve several goals when budgeting is under taken for a business activity. Under normal circumstances budgets are used for the purposes of attaining control and evaluation, communication with different concerned parties, planning, and motivation of the factors involved in the business process. “Goal setting is a characteristic of successful business and a budget is a critical part of the process. It is a financial forecast of your operating and capital activities.”(Carol Patterson)i Operating budgets are used for planning the operations to achieve strategic objectives. Operating budget draws the attention of the management toward revenue projections and regular and routine expenditure to raise that projected revenue. The management can set up goals of earning specific revenue in order to meet the required payments for the generation of that revenue and improve the entity’s liquidity to meet unforeseen expenditure and payments. In fact operating budget force the management to plan for increasing profitability as there is direct relation between economising of the business expenditure and profitability. The main goal of planning and control is always achieved through efficient budgeting. “The budgeting system is designed to plan and control a business. However, it is common for the budget to be ‘gamed’ by its participants. For example managers may pad their budgets with excess resources. In this way, managers will have additional resources for unexpected events during the period. If the budget is being used to establish the incentive plan, then sales managers have incentives to understate the sales potential of a territory to ensure hitting their quota.”(Carl S Warren, James M. Reeve, and Jonathan Duchac)ii That way revenue or operating budget can be made objectives to be achieved by the operational staff. Incentives when linked with budgets automatically create sort of enthusiasm among the operating staff to achieve budgetary targets or goals. It is believed that businesses should always create and apply budgets in order to keep a check or track of their income and expenses. This is more applicable for small business and operations. Budgeting helps the businesses to project their profitability to be achieved over a period covered by the budget. Budgeting can spot problems and plan in advance the means to rectify those problems and issues. In a way financial
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(“Budgeting Coursework Example | Topics and Well Written Essays - 1500 words”, n.d.)
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“Budgeting Coursework Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/other/1393786-budgeting.
This paper will discuss budgeting with respect to the construction industry. It will describe the functions of budgeting along with the role of budgeting in motivating behaviors within organizations. We will also discuss how potential dysfunctional consequences arise from the actions that budget holders may take when they are responsible for the budget.
The author states that the capital budgeting is vital in developing evidence-based criteria for investment decisions. The analysis incorporates the aspect of IRR, NPV profile, MIRR, incremental cash flow as well as the impact of investment tax credit. The paper concludes with a classical decision making rationale inherent in the proposed sale projection.
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In order to get the MIRR for project B, let us assume the same rate of reinvestment as above (10%). Using the same formula, the future value of the positive cash flow = 700,000 (1.1) ^5 + 250,000(1.1)^4 + 1,350,000(1.1)^3 + 1,650,000(1.1)^2 +
n is a marketing budget as it determines the ability of the marketing plan to be made to reality influences the ability of the marketing strategies to bring forth the results expected by the marketing managers. The aim of this part is to develop a marketing budget, critically
However, for the bond holders they are not to expect anything since the case does not include them in valuation gain of the company.
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Most performance budgets places emphasis on employees’ commitment to provide quality results to the satisfaction of the public.
Performance based budgeting has great characteristics that has made it quite suitable in public sector budgeting for local governments.
Business capital budgeting decisions should be taken with a lot of precaution because they influence the long-term growth of the organization, affect overall risk of the business, involve commitment of enormous amount of funds and the projects are mostly irreversible or
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