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Unit 2: Business Resources - P6
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P6: illustrate the use of budgets as a means of exercising financial control of a selected company
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BTEC LEVEL 3 90 CREDIT INBUSINESS
UNIT 2: BUSINESS RESOURCES
P6: illustrate the use of budgets as a means of exercising financial control of a selected
company
Introduction
This assignment focuses on the budgets (types, uses, benefits, and limitations), break-even
analysis, budget variances and cash flow forecasting and how they can be, used in Brunel
University.
Budget Definition
A budget is how a business tracks and manage their resources. There are several different
types of budgets, which businesses use to measure how much they are spending and helps
them to create effective strategies to increase their sales and revenue.
Uses of budgets in a business:
1. Control Income and expenditure
2. Provide direction and co-ordination
3. Monitor performance of the business
4. Establish priorities and set targets in numerical terms
5. Improve efficiency
Types of Budgets
There are different types of budgets that are, used in a business for different reasons. These
types of budgets include the following:
Master Budget- this is the combination of all lower level budgets produced by the
organizations numerous functional areas. It includes financial statements, cash
forecast and a financing plan. This enables the company to be able to plan
strategically.
Operating Budget- this budget is a detailed statement that consists of the expenses
and revenues that a company expects for a period.
Cash Flow Budget- this budget is planning tool used by companies to create an
estimation of all cash receipts and expenditures that a business expects will occur of
a period. These estimates can be monthly, bimonthly or quarterly.
Financial Budget- is the organization’s strategy for managing their assets, income,
cash flow and expenses. This budget helps the company to create an overview of its
spending relative to revenues from core operations.
Static Budget- this budget is a fixed budget that remains unchanged regardless of
any changes in factors such as sales volume or revenue.
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