ch3-lect - Chapter 3 The Cash Budget Introduction This week...

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Chapter 3 The Cash Budget Introduction This week we will review concepts related to the cash budget and learn helpful techniques in Excel to build useful budgeting models. Many companies create their budgets, of which the cash budget is one type, in spreadsheet programs like Excel. While many accounting programs claim that they can create budgets, they are generally can only capture short-term operating flows. For this reason, modeling outside of the accounting systems persists. As we work through our cash budget activity, let’s keep the following general concepts in mind. Budgeting and the Cash Budget ± A budget is a quantitative expression of a plan of action that shows how a firm, an organization, or an individual will acquire and use resources over a specified period of time Most organizations establish a budget committee comprised of several senior company representatives who coordinate the preparation of detailed budgets in their areas of responsibility and oversee preparation of the overall budget. There are significant behavioral ramifications to consider in preparing an operating budget. For the budget process to be successful: ± Top management must give its full support, ± All members of management must actively participate in the process, and ± Deviations from the budget must be addressed in a constructive manner. ± If only the top management is involved in budget preparation, it is referred to as top-down budgeting. ± When each segment manager prepares a budget for that segment's operations, it is called bottom-up budgeting. ± Most budgeting processes incorporate both approaches to some degree.
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This note was uploaded on 02/14/2011 for the course FINANCE 615 taught by Professor Green during the Fall '09 term at UMBC.

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ch3-lect - Chapter 3 The Cash Budget Introduction This week...

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