Budgets

Question 1

Aids decision making by:

Answer 1

Providing a standard against which actual performance can be measured. This allows the owner to identify areas in which performance is unsatisfactory, so that remedial action can take place. This can include the calculation of budgeted ratios and other indicators of performance

Question 2

Budgeted cash flow statement

Answer 2

Attempts to predict all future cash inflows and outflows, and thus the estimated bank balance at the end of the budgeted period, to assist the owner in assessing the firms ability to meet it’s obligations over the budget period

Question 3

Assists planning by:

Answer 3

Predicting what is likely to occur in the future. This allows the owner to prepare so that possible problems may be managed, and possible opportunities may be taken