is managements plan for future time period a forward looking statement

Is managements plan for future time period a forward

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is management’s plan for future time period (a forward looking statement ), expressed in financial terms . It’s used to Control operations (provide basis for decision making , to implement target) and evaluate performance (feedback mechanism, provide benchmark, translating broad strategic goals into small, measurable targets to assess performance), A budget promotes efficiency and serves to deter waste and inefficiency Typical exam question: scenario of a company, suggest ways management and accountant may use to help managing the company. Answer: Budgeting is a good way to helps with business management, may indicates which budget statement is useful for what level of management, e.g. sales manager use sales budget, production manager use production budget, general manager use a combination of different budget to get a complete picture of the firm + role and benefits of budget. Different types of budget -master budget is a set of interrelated budgets, consists of: Operating budgets (sales and production) which lead to the budgeted income statement Financial budgets (cash budget and budgeted balance sheet) that are concerned with cash resources for expected operations and capital expenditure 来说公司 operating budgets financial budget 都同时需要,如果只有用到 中一种 budget 可以 建议 公司考 同时做 一种 budget 该种 budget 好处 ,例如如果题目 到公司只准 financial budget, 那可以 提议 公司也需要准 operating budget, 例如 sales and production budget better plans for changing circumstances, 看对 sales 有什么 影响 ,然后 adjust production schedule accordingly.
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果公司只有准 operating budget, 没准 financial budget, 可以 建议 financial budget, 用来看 change in market condition/competitiveness landscape 对于 profit(budgeted income statement), liquidity (cash flow statement), 还有 balance sheet 影响 -Static budget vs. flexible budget Static budget can only project budget data at a specified level of activity. If static budgeted target is not reached, it could be either that the level of activity is not reached, not sell enough or purchase more; or it could be a factor of price/cost different from planned. Flexible budgets should shows budget outcome at different activity levels to isolate cost and price effect, and it can help manager to identify what causes the deviations from budgeted level, which is more meaningful for variance analysis (of course it’s a more troubled approach, but it’s more informative at the same time). Static approach is simple and easy to implement, it’s appropriate to use if the activity level doesn’t varies much.
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