Budgets and Cash-Flow Forecasts (AQA A-Level Business): Flashcards
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Definition of a budget
Definition of a budget
A financial plan that provides targets for a business
Three components of budgets
Three components of budgets
Income budgets, expenditure budgets, profit/loss budgets
What an income budget forecasts
What an income budget forecasts
Earnings a business expects to receive from sales
What an expenditure budget sets out
What an expenditure budget sets out
Expected spending of a business in various categories
Formula for profit/loss budget
Formula for profit/loss budget
Forecast Income - Forecast Expenditure
Variance analysis definition
Variance analysis definition
Studying differences between planned and actual results
Formula to calculate variance
Formula to calculate variance
Actual Figure - Budget Figure
When a favourable variance occurs
When a favourable variance occurs
Costs lower than forecast OR revenues/profit higher
When an adverse variance occurs
When an adverse variance occurs
Costs higher than expected OR revenues lower
Key benefit of budgets
Key benefit of budgets
Allows managers to set targets for departments/divisions