8.8 Identification of financing needs: budgeting and forecasting Flashcards
The financing needs of an organisation may be grouped into which two categories?
1 Long-term financing
2 Short-term financing
What is meant by “budgeting”?
An outline of a company’s financial plans, normally drawn over three to five years.
What is a cash budget?
Budget setting out the cash inflows and outflows of a business over a specific period of time, ensuring the business has sufficient cash to operate.
What is a master budget?
A budget showing how all the budgets work together to project combined incomes and outflows for the business.
What is financial forecasting?
A projection of the company;s future financial outcomes by examining its historical and current financial data.
How are budgeting and financial forecasting linked?
They both make sure the business is heading in the right direction - budgeting quantifies targets and forecasting reveals actual circumstances affecting these targets.
What are the two broad types of budget?
1 Flexible budgets
2 Static budgets.
What is a static budget?
A budget which has fixed levels of expected input, output and costs of production.
What is a flexible budget?
A budget that adjusts according to volume or activity.
Which is more useful, static or flexible budgets?
Flexible, as it offers more accurate results and better scope for planning.
What is budgetary control?
One a budget is prepared, budgetary control is used to control and monitor actual results against the budgeted figure.
What is a cash forecast (in the context of cash budgeting)?
A projection of cash receipts and payments for a future period to help determine income and expenses.
