Pro Forma Budgeting

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Budgeting is the foundation of every financial plan of operation. A sound budget comes from understanding how much money you have, where it goes, and then planning how to best allocate those funds for a company. A financial budget is a financial plan that is structured to note projections on incomes and expenses on both a long and short term basis. Budgets incorporate budgeting strategies for a period of at least one year, although in some case organizations may prepare a budget to cover from anywhere to two to five years at a time. (Tatum, 2012) There are numerous reasons that a budget is important. One reason would be setting the long and short term goals for a business to follow. The budget in this circumstance is a document that serves…show more content…
The financial balance sheet will demonstrate the current and total assets and the current and total liabilities of the business. The financial income statement will demonstrate the projected income, or losses, of the business in a given year. And, the financial statement of cash flows will demonstrate the projected liquidity and the operating cash for the business in a given year. (What is a Pro Forma Financial Statement?, n.d.) A pro forma financial statement is a statement that is usually presented to a potential investor in a company to demonstrate the financial merits of investing. As well, public companies must file a pro forma financial statement with the Securities and Exchange Commission (SEC). The SEC also requires publicly traded companies to file pro forma financial statements anytime there is a significant change in the accounting means used by that company. (What is a Pro Forma Financial Statement?,…show more content…
One is that the amount of over stock is lowered which means a reduction in the storage space required which saves rent and the costs associated with insuring the additional stock. Additional stocks of items are only obtained when they are needed which means that less working capital is tied up in an excess of stock. There is also less likelihood that if the stock would be perishable that it would become obsolete or out of date. JIT also helps to avoid the buildup in stock should there be sudden changes required for the product or is the change in demand decreases. Finally, by employing the JIT manufacturing process this will require less time spent on checking or reworking the product because the JIT process emphasizes getting the work done right the first time. (Inventory Counting,
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