finance

Question 1

what is a budget?

Answer 1

a financial plan of action, normally covering a period of time period

Question 2

what is the purpose of budgets?

Answer 2

-gain financial support
- prevents overspending
- improve efficiency

Question 3

what is variance analysis?

Answer 3

used as a means of assessing how accurate a businesses budgeting is

Question 4

what is a favourable variance?

Answer 4

when the difference between the actual budgeted figures will result in the business enjoying higher profits than planned

Question 5

what is an adverse variance?

Answer 5

when the difference between the budget and the actual figures will lead to the profits being lower than planned

Question 6

what are limitations to a business of budgeting?

Answer 6

-employees may not follow the budget
- the budget may have been based on poor research, causing high variances
-unexpected costs may arise
- new competitor entering market may make revenue budget tricky

Question 7

what are limitations to stakeholders of budgeting?

Answer 7

• suppliers may not get paid on time
  -there may not be job opportunities for the local community for inaccurate budgeting
  -shareholders may have expected higher profits so receive less dividends