Budgeting and Financial Planning - PowerPoint PPT Presentation

1 / 23
About This Presentation
Title:

Budgeting and Financial Planning

Description:

Budgeting and Financial Planning Chapter 15 Why budgets? Planning Controlling Coordination Allocation of resources Evaluation Master budget Series of individual ... – PowerPoint PPT presentation

Number of Views:3450
Avg rating:3.0/5.0
Slides: 24
Provided by: DavidBuk1
Category:

less

Transcript and Presenter's Notes

Title: Budgeting and Financial Planning


1
Budgeting and Financial Planning
  • Chapter 15

2
Why budgets?
  • Planning
  • Controlling
  • Coordination
  • Allocation of resources
  • Evaluation

3
Master budget
  • Series of individual budgets and schedules
    representing the plan for the organization
  • Begins with sales forecast
  • Ends with pro forma financial statements

4
Sales budget
  • Revenue and unit forecast
  • Based on various pieces of info
  • Past sales, trends, pricing policy, competitors
    actions, etc.

5
Operational budgets
  • For various operational areas
  • Tailored to the type of organization
  • Revenue-producing resource needs
  • Production or acquisition
  • Selling and administrative
  • Cash receipts and disbursements
  • Capital budget

6
Production budget
  • Based on sales forecast, desired inventory levels
  • Sales end. invty. beg. Invty.

7
Materials budget
  • Based on production needs, desired material
    inventory levels

8
Labor budget
  • Based on production needs

9
Overhead budget
  • Based on production needs
  • Not all costs will be proportional to units
    produced
  • Batch-level
  • Product-level
  • Facility-level

10
(No Transcript)
11
SGA budget
  • May be unit-, batch-, product-, customer- or
    facility-level
  • Selling expenses based on units sold
  • Not units produced

12
(No Transcript)
13
Cash budget
  • All cash inflows and outflows
  • Possible timing differences between revenues and
    expenses and the resulting cash flows
  • Credit sales
  • Schedule of cash receipts
  • Credit purchases
  • Schedule of cash disbursements

14
(No Transcript)
15
(No Transcript)
16
(No Transcript)
17
Budgeted cost of goods manufactured
  • Determines the absorption cost per unit
    manufactured

18
Pro forma financial statements
  • Income statement
  • Revenue from sales budget
  • Cost of goods sold from unit cost calculation
  • SGA expenses from SGA budget
  • Other expenses from cash budget
  • Interest expense
  • Income tax expense

19
(No Transcript)
20
Pro forma financial statements
  • Balance sheet
  • Some items direct from budgets
  • Cash
  • Accounts receivable
  • Materials inventory
  • Finished goods inventory
  • Accounts payable
  • Some are rolled forward from previous year
    balances

21
Pro forma financial statements
  • Statement of retained earnings
  • Previous year balance
  • Add pro forma income
  • Subtract dividends (cash budget)
  • Cash flow statement
  • Direct from cash budget

22
Budget considerations
  • Different budgets for different uses
  • Planning
  • Master budget
  • Static budget
  • Controlling
  • Flexible budget
  • Includes different levels of activity as
    benchmarks
  • Evaluating
  • Flexible budget
  • Budget at actual level achieved

23
Budget considerations
  • Behavioral and ethical issues
  • Based on estimates
  • May be intentionally misstated to make actual
    results look better than planned
  • Misallocation of resources
  • Breakdown of coordination
  • Participative or imposed?
  • Who knows best?
Write a Comment
User Comments (0)
About PowerShow.com