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Lecture 9

BUS 202 Lecture Notes - Lecture 9: Promissory Note, Sensitivity Analysis, Budget

13 pages85 viewsSpring 2017

Department
Business
Course Code
BUS 202
Professor
Joseph D' Adamo
Lecture
9

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University of Rhode Island
BUS 202 Managerial Accounting 2016 - 2017
Joseph M. D’Adamo
Course Outline #9: Information for Planning
Page 1 of 13
I. Planning
A. Description
Management process of:
1) Setting objectives and goals for a firm or a component of a firm
2) Identifying and evaluating alternative courses of action to achieve goals
3) Choosing the course of action to be followed
4) Developing budgets for planned activities
B. Types of Planning
Strategic Planning Long-term Planning
Operational or Tactical Planning Short-term Planning
II. Operational or Tactical Planning
A. Nature
Process that establishes specific goals and objectives for an entity as it strives to achieve its
mission
Generally covers short time horizons of up to 18 months
Identifies specific activities that the entity will carry out
Produces detailed budgets
B. Budgeting
1. Nature and Purpose
a. Master Budget = Operating Budget
Documents the specific short-term operating performance goals and objectives
designed to:
o Implement the strategic plan
o Carry out mission and progress toward achieving vision
Provides means to evaluate planning decisions
o Quantifies the amounts and timing of estimated resources required and
expected resources generated
o Estimates the effects of planned activities on the firm’s cash resources,
profitability, and financial position
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Course Outline #9: Information for Planning
Page 2 of 13
Communicates operating plan throughout the firm
o Motivates and guides managers and employees
o Creates means to control and evaluate performance
b. Capital Budget
Financial management technique used to plan for long-term investment projects
such as the acquisition of PP&E
Evaluates proposed investment projects in terms of the expected returns relative
to their risks
2. Overview of Operational Planning Budgets
Strategic
Planning:
Operational
Planning:
Master Budget
Capital Budget
Operating
Budgets:
COGS
Budget
SG&A Expense
Budget
Financial
Budgets:
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Course Outline #9: Information for Planning
Page 3 of 13
3. Master Budget: Operating Budgets
Document the planned activities by identifying the expected inputs to be used and their
resulting outputs
Use non-financial measurements to establish goals that serve as performance
benchmarks or standards
Examples: Sales Budget, Production Budget, Human Resource Budget
4. Master Budget: Financial Budgets
Financial budgets such as pro-forma income statements and balance sheets measure the
financial effects of the planned activities on profits and on the entity’s financial position
Cash budget is a financial budget that predicts cash inflows and outflows in terms of
their amounts, timing, sources and uses
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