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Business Finance -Assignment

   

Added on  2020-10-22

11 Pages3361 Words163 Views
BUSINESS FINANCE

TABLE OF CONTENTSTABLE OF CONTENTS..............................................................................................................2INTRODUCTION...........................................................................................................................1PART 1............................................................................................................................................11. Purpose of preparing budget with its process and its benefits to business model...................12. Demonstrating application of traditional budgeting approaches along with incrementalbudgeting.....................................................................................................................................23. Analysing traditional budgetary system is appropriate or not.................................................3PART 2............................................................................................................................................54. Understanding on alternative budget method with its merits and drawbacks.........................55. Application of these methods with elements of budgeting as alternative method..................76. Analysing that one or combination method is beneficial to business entity............................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9

INTRODUCTIONBusiness finance is consider as very important aspect for business perspective, as this reportwill give brief description about budgeting which is beneficial to business model. It willdemonstrate application traditional budgeting approaches. It will analyse about that traditionalbudgetary which is appropriate or not. This report will discuss about alternative budget methodssuch as zero, rolling and activity based budgets with its merits and demerits along with perfectcombination or individual to be mix.PART 11. Purpose of preparing budget with its process and its benefits to business modelBudgeting is considered as process for implementing, operating and designing budget. Itis referred as managerial process of preparing and planning budget, budgetary control along witheach related procedure. With context of accounting, it is at highest level as in future it indicatesdefinite action course and not reporting merely. It should be not known as forecasting as it helpsin predicting budget but here this process is physically replicated as detailed analysis andplanning with absence of prognosticating future outcome. The overall objective of budgeting isto plan about multiple phases of operations of business and to coordinate activities of differentdepartments of business entity for ensuring about effective control (Bassemir and Novotny‐Farkas, 2018). The firm’s future financial condition is anticipated and future requirements for funds areemployed in business with perspective of keeping business as solvent. The composition ofcapitalisation has been decided for ensuring about funds availability at reasonable cost. Theefficiency about operations has been accelerated among divisions, departments and firm's costcentres. Further, the responsibilities are fix on basis of different departmental heads. Theeffective control has been ensured about its inventory, sales and cash. It also facilitatescentralised control over business entity over budgetary system.The process of budgeting for big companies directly initiates prior to four to six monthsbefore the financial year as some might take whole financial year for completing it. The budgetcould be set and undertakes variance analysis on monthly aspect. The initial planning stage,organization will go via series of stage and appropriate implementation. The most commonprocess considers communication in executive management, setting targets and objectives,1

developing detailed budget, revision and compilation of budget model, review about budgetcommittee along with board approval.The budget will give benefit to business which considers ability for purpose of followingmanagement strategy for raising market share, earning margin and to raise current margin. Thiswill be avoiding multiple pitfalls which will put small companies not in business. The expansionplan about operations and application for financing, there is request from bank loan officer withprojection of future budget. Simultaneously, business plan consists of applying to federal forgranting money then budgeting is referred as necessity.2. Demonstrating application of traditional budgeting approaches along with incrementalbudgetingIn the present scenario, rapid changing conditions and technology of modern world areforcing organizations for reviewing budget system and management. In the similar aspect, thereis maintenance of sustainable organization as company management should optimize availabilityof multiple financial resources through planning and controlling. The most widely usedmanagement tool for planning and controlling is budgeting (Black and et.al., 2018). It mainobjective is to produce system for performance evaluation and to raise employee motivationthrough enhancing communication and coordination among companies subsections. On thecontrary, approach of traditional budgeting is refereed as method for preparing budget where lastyear's budget is considered as base. The budget of present year is prepared for making alterationsto budget of past year with adjustments of expenses on basis of rate of inflation, market situation,consumer demand etc. The revenue and cost through integral part of budget of current year.There is only identification of items which are to be justified in over and above budget of lastyear in traditional budgets.Particulars January February MarchAprilMayJuneCash inflows Opening cash inflow700078401133514913.9818575.7922319.15Total revenue130001326013525.2137961407214353Other income500050005000500050005000Sum of cash inflows 250002610029860.233709.6837647.4141672.22

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