04 Budgets

Question 1

Strategic planning

Answer 1

Long term planning (3-5 years), usually by senior management, relates to broader issues like business takeovers, expansion plans, deletion of business segments, and radical product/service development.

Question 2

Budgeting

Answer 2

Short term (usually one year), evaluates whether there will be enough resources available to achieve strategic plan and whether strategy leads to profits thereby creating value for entity.
The strategic plan is created and allows operational areas to understand how their area contributes to the entity's strategic objectives. (Simply the quantitative expression of an entity's plans.)

Question 3

Budget cycle (inve..)

Answer 3

Investigate differences between actual and budget

Question 4

Budget cycle (eval..)

Answer 4

Evaluate and reward performance

Question 5

Budget cycle (reas..)

Answer 5

Reassess vision and core competencies

Question 6

Budget cycle (reco..)

Answer 6

Reconsider long-term strategies

Question 7

Budget cycle (devel..)

Answer 7

Develop operating plans

Question 8

Budget cycle (tran..)

Answer 8

Translate strategies and operating plans into master budget

Question 9

Budgetary slack

Answer 9

Deliberate under-estimation of budgeted revenue or over-estimation of budgeted expenses.

Question 10

Which of the following describes a way in which budgeting can assist in decision making?

Answer 10

Determining inventory levels, identifying expected cash shortages, setting production targets for managers

Question 11

Which of the following statements about a cash budget is true?

Answer 11

It documents the timing of all estimated cash receipts and cash payments, it assists with the planning of borrowing, it helps to identify periods of cash shortages and/or cash surpluses

Question 12

Cash budget

Answer 12

The budget that sets out the expected future cash receipts and cash payments during the budget period

Question 13

Having a budget that directly links employee bonuses with sales targets may lead to..

Answer 13

A culture among sales staff where sales targets are to be achieved regardless of the consequences

Question 14

It is best to set budgets targets that are..

Answer 14

On the high side but fair

Question 15

The first step in the budgeting process is commonly..

Answer 15

Consideration of past performance