Reference no: EM13500038

Chanta Johnson

AIU

January 11, 2012

Forecasting is the real prediction of your values and budget projected into the future and sets an expected result within a specific time frame; the objective of it is to reduce risk in decision making. On the other hand budgeting is the process of systematizing your on hand earnings and everyday expenditure for the idea of foretelling your financial values to achieve desired outcome into the future. (Shim, Siegel, & Shim, 2012)

What is the difference between an operating budget and a cash budget? Operating Budget is the process that provides an overview of the operating expenses to organize or manage a business. It includes the businesses daily fixed cost and income that gives them the chance to analyze an expected income. In general in a government ran institute entities included consist of wages, profit, rental fee, utilities, equipment, and replacement of reduced price for tools in the operating plan.

Cash budget, also acknowledged as the cash flow budget is a calculation or forecast of yet to come cash revenue and spending for a specific time period, typically in the short-range future. This budget shows the tangible standing of the company and foresees how the business will meet its overheads without external financial support. (AIU, 2012)

Explain what zero-based budgeting is and how it can improve theefficiency of the organization? Zero-based budgeting is the process in which managers can plan an educated guess of his or her projected expenses for a precise time period as if the process were being completed for the initial time.

This process is essential because it enables mangers a chance to start a budget cycle from a base of zero and forces them to take look closely at all of the companies operating cost. The outcome of this process and findings are then reviewed and validated to top executives. A process that aids in improving to support and reduce any companies surplus which will increase effectiveness of any organization.

References

AIU, (2012) FINA425 Unit 1: Fundamentals of Budgeting. Multimedia Presentation [Course Material] Retrieved from AIU Online Virtual Campus, FINA425-1201A-01: Budgeting

Shim, J. K., Siegel, J. G., & Shim, A. I. (2012). Budgeting Basics and Beyond. (4thed.) Hoboken: John Wiley and Sons Inc.