Flashcards in Finance- Cash Budgets Deck (11)
What is a budget?
A statement of anticipated future expenditure. It usually covers a specific time period such as a month or a year
What is a cash budget?
A common type of budget that is used by most businesses to monitor, control, obtain and present information.
What are the uses of budgets?
To improve decision making
To set targets
To delegate authority
To plan ahead
To monitor and control
How can budgets improve decision making?
They allow managers to see how well the business is performing by comparing one time period to another
How can budgets help monitor and control?
Setting a budget and then comparing it to actual performance means that comparisons can be made on a regular basis and changes made quickly to solve problems
How can budgets help plan ahead?
They are useful to highlight areas of strength or plan for areas of estimated deficit.
What are the main benefits to management of using cash budgets?
How do cash budgets help to plan?
They look ahead to set aims and strategies
Allow problem solving to be planned rather than having to react to situations
How can cash budgets help to command?
When management are able to make informed decisions, this enables them to instruct their subordinates
How do cash budgets help with delegation?
Management authority should make subordinates responsible for a suitable range of tasks and give them the authority to carry them out