5. Performance measures: budgeting and forecasting systems

Question 1

5. What are the 5 main budget methodologies?

Answer 1

• • Zero-based - as if 1st time
• • Incremental - % change on previous periods
• • Top-down - from senior strategy down
• • Bottom-up - Line managers prepare and then goes up for approval
• • A combination of top-down and bottom-up - combination senior and line managers

Question 2

5. What are 6 common internal and external factors to consider when developing a budget or forecast?

Answer 2

• • An organisation’s historical performance.
• • Seasonality.
• • New products, services or markets.
• • New investments.
• • Industry developments and changes.
• • Economic trends and conditions.

Question 3

5. What is sensitivity analysis in business planning?

Answer 3

It focuses on the implications of changes in a key business driver (a variable) on the anticipated results (operational and financial).