There are many people who think that in the current environment of rapid change budgeting is not helpful because an operating budget is basically out of date when it is finished. Some of these folks suggest other processes instead of budgeting. Write a 1 page paper giving your reasoned opinion as to whether budgeting is still useful.

answer

watching

145

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Elin HesselLv2

2 Oct 2018

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Bill Travis owns two Just 4 Kids stores in Florence, SouthCarolina. He believes that the stores have been successful and hewants to open a new store in Sumter about 30 miles west ofFlorence. Bill has been in the retail line for over 20 years, andhe worked at his uncleâs hobby shop while in high school andcollege before starting his own store at the age of 25.

Two big secrets to a successful toy store operation are goodlocation and product selection. Billâs first store is located indowntown Florence. Since Bill had been born and raised in Florence,he attracted a good customer base that remained loyal to his storeafter some of the giant chain related toy stores began to move intothe area. About 10 years ago, Bill saw the change in customershopping habits and purchased a second store near an interchange toInterstate 95 in a rapidly growing retail area. Lots of newfamilies had moved into the area, and Bill could not totally relyon the âgood old boyâ market alone to sustain his market share.This second store catered to the younger more mobile generationthat shopped at or near malls.

Bill now was looking into other markets. Sumter was not locatedon the interstate, but the area was growing because of itsproximity to the state capital of Columbia, which was just 30 milesto its west. Bill believed that the people of Sumter who commutedto work in Columbia would prefer to limit their driving forshopping activities to the immediate Sumter area. Also, since Billwas a respected citizen of Florence, his reputation as an honestbusinessman had spread to Sumter. He believed he could quicklybuild up a new customer base in that location. The big chain typestores also did not seem as interested in the Sumter area,preferring instead to locate in the larger metropolitan areas ofColumbia and Florence.

The appropriate toy items to feature in his stores were veryimportant. Bill felt that his area of influence was strictlyregional, and he did not have to carry much of the standardinventory of the national chain type of toy stores. His toy lineswere more a reflection of local interest; thus NASCAR related itemswere hot sellers. Billâs clientele also seemed interested incomputer action games and a new line of Yaâll talking dolls.

Bill went to the Florence National Bank to inquire about fundingfor the new store location. He had found an abandoned furniturestore in downtown Sumter along Main Street that was up for sale for$280,000. The store seemed to be the right size and at a goodlocation. A grocery store was in the same block with ample offstreet parking. Bill brought his balance sheet for the last twoyears and an income statement for the last operating year to thebank to support his request for a retail loan of $250,000. (Copiesof the financial statements are listed at the end of the case.)

Nick Tightwad, the local bank loan vice president had been afriend of Billâs for many years. He was a customer at Billâs toystore on close out sales, and his bank had underwritten the fundingfor the second store. Nick was excited about Billâs expansion goalsand the prospect of another business loan with his friend. At thesame time, Nick had to live up to his reputation. He was not aboutto approve a loan unless he was almost 100 percent sure that theborrower would not default. Billâs past success had alleviated muchof Nickâs concern, but he still wanted to complete a detailedanalysis of the financial performance of Just 4 Kids during thelast calendar year. Upon reviewing the balance sheet, Nick noticeda drop in cash during the last year even though Bill showed astrong profitable performance. The current financial statements didnot seem to give enough information to answer Nickâs questions andhe asked Bill to prepare a statement of cash flows for the yearending December 31, 20x7.

Just 4 Kids

Balance Sheet

December 31, 20x6

ASSETS
Cash		$ 38,500
Accounts Receivable		43,000
Inventory		126,000
Other Current Assets		17,500
Total Current Assets			$225,000
Land		$100,000
Furnishings, Fixtures & Vehicles	$150,000
Less Accumulated Depreciation	-30,000
Furnishings, Fixtures & Vehicles (net)		120,000
Building	400,000
Less Accumulated Depreciation	175,000
Building (net)		225,000
Total Long-Term Assets			445,000
Total Assets			$670,000

LIABILITIES
Accounts Payable		$ 57,500
Short-Term Notes Payable		20,000
Other Current Liabilities		13,000
Total Current Liabilities			$ 90,500
Long-Term Notes Payable			400,000
Total Liabilities			$490,500
EQUITIES
Capital		$100,000
Retained Earnings		79,500
Total Equities			$179,500
Total Liabilities and Equity			$670,000

Just 4 Kids

Income Statement

For the Year Ended December 31, 20x7

Sales Revenue		$600,000
Less Cost of Goods Sold		310,000
Gross Margin		290,000
Less Operating Expenses
Selling and Administrative	$106,200
Depreciation	20,000
Total Operating Expenses		126,200
Operating Income		163,800
Interest Expense	$50,000
Loss on Vehicle Sale	2,500
Total Other Expenses		52,500
Net Income Before Taxes		111,300
Less Income Taxes		39,300
Net Income		$72,000

Just 4 Kids

Balance Sheet

December 31, 20x7

ASSETS
Cash		$2,600
Accounts Receivable		71,000
Inventory		193,000
Other Current Assets		18,900
Total Current Assets			$285,500
Land		$100,000
Furnishings, Fixtures & Vehicles	$166,000
Less Accumulated Depreciation	-28,500
Furnishings, Fixtures & Vehicles (net)		137,500
Building	400,000
Less Accumulated Depreciation	190,000
Building (net)		210,000
Total Long-Term Assets			447,500
Total Assets			$733,000

LIABILITIES
Accounts Payable		$ 91,500
Short-Term Notes Payable		35,000
Other Current Liabilities		7,000
Total Current Liabilities			$133,500
Long-Term Notes Payable			388,000
Total Liabilities			$521,500
EQUITIES
Capital		$100,000
Retained Earnings		111,500
Total Equities			$211,500
Total Liabilities and Equity			$733,000