profit_planning_or_budgeting_in_general_dr

profit_planning_or_budgeting_in_general_dr - Profit...

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Profit Planning or Budgeting in General Dr.Kiani I. The goals of organization : Profitability Manpower ( Human Resources) Growth Financial Self-Sufficiency (Capital Structure) Cost Minimization Product Leadership Market Diversification Global Business Environment Global Business Competition Intense Business Competition Product Quality Environment Responsibility Community Services II. What is a budget ? A budget is a financial expression of management decisions or plans for the future. Budgeting is primarily attention directing information. It is for information gathering, planning and control purposes. Three ways to collect information for managerial decision making : A. Scorekeeping accounting information (communicate information on historical basis) B. Attention directing information (budget, standard costs & Variance analysis) C. Problem solving accounting information ( break even analysis, EOQ, Capital Budgeting) III. Purposes of budgets : A. The budget is used to plan and coordinate the overall activities of the firm and it forces management to quantify their expectations. B. The budget is used to communicate to all employees the goals and objectives of the firm and the ways and means to be used to attain the stated goals and objectives. C. The budget is used to assign to each employee the responsibility for the performance of a given task, and it serves as a final guide in evaluating the adequacy of the employee’s performance . D. The budget is used to give management a chance to examine the environmental conditions and changes , thereby increasing their potential to reduce uncertainty and shape the firm’s future progress.
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