Budget Flashcards
What is a budget
A tool to used to plan how much money is available and how best to use it
Purpose
Assist with financial planning- forces proactive approach
Priorities spending of the money
Positive of credit policy
Increase sales
Gain competitive advantage;consumers don’t always have cash
Negative of credit trading
Risk of bad debt
Need more working capital
Loses out on opportunities to invest money
Credit policy
Credit period: length of time prepared to give a loan
Credit limit: Maximum amount
Cash discount: given to avoid credit
Capital budget
Used to plan fixed capital
Cash budget
Used to plan working capital
Financial functions objectives
Maximize profit by ensuring enough capital is available in the business to carry its functions efficiently
Feasibility studies
A business is considering launching a new service or product they have to ensure if the investment is worth it
