Nt1310 Unit 2 Term Paper

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QUESTION 2 Doomy Corporation needs the same careful handling of its expenditures. Like all businesses, no matter what type or size, need to properly develop a plan for their expected cash intake and spending. This plan reflect the financial situation of the business, identify the quantity, amount and timing of the various resources needed, and it can be prepared quarterly or annually. It is important: For the corporation to properly prepare its cash budget to show how cash flows in and out of the business. Also, it may then be used in planning short-term credit needs, communicating, controlling and coordinating various activities, motivating and evaluating employee’s performance. In today’s financial world, businesses are required by most financial institutions to prepare cash budgets before making capital expenditures for new assets as well as for expenditures associated with any planned expansion. The…show more content…
A budget tends to emphasize on results and the real reasons are being ignored. Budgetary slack or padding the budgets as managers will intentionally blow up their budget figures for fear of top management’s reprimanding them. Compared with cost, budgeting provides little valuable, reliable and relevant information. In the main, budgets are based on an assumption that often turns to be inaccurate. Budgets are generally backward looking and inward -orientated instead of being market oriented. Therefore, they inevitably provide irrelevant and unreliable data to the user. In conclusion budgeting is a major management activity, and while it has some useful function for business and organization, it does have limitation. It takes lot of time and other resources but provide little credible and useful information. They add little value but encouraged dysfunctional and wasteful behaviors as well as de motivating

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