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Master Budget: Understanding the budget preparation process and the use of budgets

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In a fast growing company, does an increase in the company's sales necessarily imply an increase on the expense side as well? Explain please.

How can organizations increase the accuracy of the budgeting process?

How are long-term capital expenditures budgeted in a quarterly budgeting process?

Are cash budgets implicitly geared towards short-term financial goals? Explian please.

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Solution Summary

In a 350 word solution, the response adequately discusses various aspects of the budgeting process including a simple template for the calculation of a cash budget.

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In a fast growing company, does an increase in the company's sales necessarily imply an increase on the expense side as well? Explain please.

An increase in sales will certainly result is an increase in the annual turnover of a company. If however the capital assets and infrastructure are already well-established and paid off, then most of the turnover will go towards maintenance of the equipment, service charges and staff salaries. Marketing strategies and IT systems to support them can be very expensive and may initially impinge on company profits, but later this loss will be overcome by increased profits via expanding market share/s.

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