BUSI 3008 Lecture Notes - Lecture 2: Cash Flow Statement, Capital Budgeting, Cash Flow
6 Dec 2016
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Operating plans: short run planning (1 yr or less) (operating, cash and cash flow budgets) Master budget: single document that summarizes all of the financial & non-financial plans of the organization. 3 components: operating budget: presents the results of operations before financing and taxes. Supporting budgets: revenue, production, dm usage & purchase, dl, moh, ending inv. , Compromised of: capital budget, cash budget, budgeted balance sheet, budgeted cash flow statement: cash budget: predicts cash position for certain level of activity. Compromised of: schedule of expected cash receipts and disbursements, timing of borrowings, repayments and interest expense. Budget process: top down: budget dictated by top management. Bottom up: lower level workers help decide the budget combination: a mix of top and lower level workers work together to decide budget. Budgetary slack: lower level employees try to underestimate budgeted revenues or overestimate budgeted expenses to make them look better it also makes the budget much easier to attain.
