MGM101H5 Study Guide - Midterm Guide: Natural Disaster
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MGM101H5 Full Course Notes
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An important part of financial planning is developing budgets. Briefly describe the three primary types of budgets and discuss the role budgets play in the financial planning process. (4 marks) One mark each for describing the three types of budgets and one mark for discussing the role budgets play. (see nickels text pages 515 to 516) It is used to guide operational decision making and also acts as a benchmark to measure performance (control). Operating (master) budget - summarizes the business"s anticipated financial activities. Projects revenues and allocates financial resources towards various costs and expenses required to achieve those revenues. Capital budget - the firms projections for large asset investments requiring significant capital resources. Cash budget - projecting the firms cash inflows and outflows, broken down into periods, to identify short term financing requirements and short term sources of funds. Managing risk is a major issue for businesses.
