ass2 finiance

1.

Cash Receipt

Estimate sales

Cash Payment

2.

Budget Balance sheet as it at 30 June 200X

Liabilities

Sale- 340000

Old MV- 34545

Cash on- 10000

Hand last year- 384545

Expense- 345500

39045

GST- 6905+

45950-

GST owning 4000

Cash= 41950

Expense (No GST)

Marketing- 50000

Admin- 30000

Salaries admin- 55000

Salaries sale- 47000

Financial C- 16000

New MV- 55000

Loan r- 12000

Purchase- 80000

Total= 345500

Question one.

Explain what is meant by the term “budget”.

Definition:

A Budget is a plan that outlines an organization’s financial and operational goals. So a budget may be thought of as an action plan; planning a budget helps a business allocate resources, evaluate performance, and formulate plans.A budget is a financial plan detailing future income and expenditure. Various households and organizations formulate a budget in order to keep their financial plans in shape. By recognizing what must be spent in the coming weeks, months or years, a person can identify whether or not current income can sustain this spending. Sometimes, upon producing a budget, it will be discovered that long-term changes must be made.Although each budget has the same fundamental rules, there are differing types of budgets. The most common budgets utilized are:

......

lthough each budget has the same fundamental rules, there are differing types of budgets. The most common budgets utilized are:

• Cash flow budgets. These budgets are utilized widely by individuals, households and businesses. They calculate how much income and expenditure there will be in the near future, to determine whether current spending is maintainable. Everyone is advised to consider formulating a cash flow budget in order to make sure they can maintain their current spending habits.

• Sales budgets. These budgets are used by retailers. They estimate the value of future sales, and can be used to plan investment and expansion. Companies can look at sales budgets when making sales goals, and may look at ways to increase the number of sales made.

• Project budgets. These are used by those who plan to undertake some sort of project; this could be a family holiday, a new retail outlet or even simply a day out. Project budgets detail the various costs of undertaking a project. Those used by businesses looking to make a profit in the long run will also include details or future income from the project.

• Production budgets. These are used by manufacturing companies who wish to know how much a product will provide them in revenue; they detail the costs of producing a product and how much it will retail for.

Question two.

Controllable factors:

Past sales:

One of the methods of estimating future sales of a product or service. Here sales forecasts are developed on the basis of past sales. There are three ways of estimating sales under this method.

These are:

(1) Time-series analysis, which consists of breaking down past time series into four components (, cycle, seasonal, and erratic) and projecting these components into the future.

(2) Exponential smoothing, which consists of projecting the next period’s sales by combining an average of past sales and the most recent sales, giving more weight to the latter.

(3) Statistical demand analysis, which consists of measuring the impact of each of a set of causal factors (e.g., income, marketing expenditures, price) on the sales level.

(4)Econometric analysis, which consists of building set of equations thatdescribe a system, and proceeding to fit the parameters statistically

Pricing of the product:

No matter what type of product you sell, the price you charge your customers or clients will have a direct effect on the success of your business. Though pricing strategies can be complex, the basic rules of pricing are straightforward:

All prices must cover costs and profits.

The most effective way to lower prices is to lower costs.

Review prices frequently to assure that they reflect the dynamics of cost, market demand, response to the competition, and profit objectives.

Prices must be established to assure sales.

Before setting a price for your product, you have to know the costs of running your business. If the price for your product or service doesn’t cover costs, your cash flow will be cumulatively negative, you’ll exhaust your financial resources, and your business will ultimately fail.

...