Financial Planning - Budgeting

Question 1

What is a budget

Answer 1

Financial plan for the future. They are set annual and monitored monthly
They al usually based on historical data

Question 2

Advantages of budgeting

Answer 2

Limits overspending
Accounts for all costs
Helps manage cash flow
Organising expenditure

Question 3

Disadvantages to budgeting

Answer 3

Not prepared for external factors
Amount is limited
Spending has to be justified

Question 4

What is a zero based budget

Answer 4

Involves starting from zero and justifying each expense rather than adjusting from the previous budget

Question 5

Advantages of zero based budget

Answer 5

Identifies and eliminates any unnecessary costs
Accounts for all costs
Improves employee engagement and motivation
Aligns loss with strategies

Question 6

Disadvantage or 0 based budgets

Answer 6

Time consuming
Past data may not be the best indicator for the future
Requires employees to make a persuasive case for their spending

Question 7

What is variance analysis

Answer 7

Compares budgeted figures with actual figures

Question 9

What is profit analysis

Answer 9

The difference between a company’s actual profit/loss and budgeted profit / loss