MGMT 122 Lecture Notes - Lecture 11: Cash Flow, Financial Statement, Budget
Document Summary
We need to overcome the natural selfish tendencies of our employees (cid:1) and we can do this with accounting numbers- budget! (cid:1) The budget says what you expect to happen in the future- what should happen: this requires predictions- how the world will evolve in the future. This plan encapsulates all of your business activities, including: sales (revenue, production, expenditures (costs, finances and cash management. The monetary impact of these activities must be predicted. Control: it tells employees what they can and cannot do. It restrains their choices and compels them to obey the plan: it is a way to communicate to employees what they need to do for the business, it also serves to control their selfish impulses, during the period. Actual results can be compared to the budget to see if the company succeeded or failed: it is only useful if you use this budget to reward or punish employees, after the period (cid:1)
