ACG 2071 Lecture Notes - Lecture 16: Income Statement, Comprehensive Planning, Earnings Before Interest And Taxes
Document Summary
What is a budget: management"s plan, for a specified time period, expressed in financial terms. How budgets fit into the bigger picture: mission statement strategic plan annual budgets, start with mission statement, strategic plan, long-term goals, extend at least 3 years into future, annual budgets, short-term plans to achieve goals. Benefits of budgeting: planning, forces managers to plan for future, communication and coordination, facilitates coordination of activities within company, greater awareness of company"s overall operations, benchmarking, specific targets for evaluating performance, early warning of problems. Involves managers at all levels: process, top management specifies targets, lower-level managers prepare budgets that meet targets, budget committee makes final decision, goal, fair and achievable budget that meets corporate goals. Integrated set of operating and financial budgets: comprehensive planning document for entire company. Includes both: operating budgets, need to run day-to-day operations, culminate in budgeted income statement, financial budgets, cash needed to fund day-to-day operations and capital expenditures, culminate in budgeted balance sheet.