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Budgeting for Riordan Manufacturing

Research Riordan Manufacturing and prepare a 1,050-1,400-word paper addressing the following topics:
1) Explain the importance of strategic planning in maximizing shareholder wealth.
2) Using the Economic Forecast on the Finance and Accounting intranet, demonstrate how forecasting has been used in the budgeting process for the most recent fiscal report. Justify your answer using the Microsoft® Excel® Operating and Cash Budgets for the most recent fiscal report on the Budgets section of the Finance and Accounting intranet. Be sure to include specific data, calculations, and/or formula details from the Excel® worksheet in your written justification.
3) Describe in detail the elements of the master budgeting process which have been created in (b) above and detail what additional steps would be necessary to complete the master budgeting process for the most recent fiscal report.
4) Suggest how some of the assumptions for the Cash Budgets might have been established.
5) What issues or concerns do you think financial managers might face in finalizing the most recent fiscal budget? What recommendations do you have to address those issues or concerns?

Solution Preview

Research Riordan Manufacturing and prepare a 1,050-1,400-word paper addressing the following topics:
1) Explain the importance of strategic planning in maximizing shareholder wealth.

Wealth maximization means maximizing the share price of the firm by maximizing the cash flows of the firm. Benefits of cash flow as criteria:

? Maximizes the net present value of a course of action to shareholders.
? Accounts for the timing and risk of the expected benefits.
? Meets the fundamental objective-maximize the market value of the firm's shares.

Planning is deciding in advance about the future course of action. Management uses strategic planning to prepare for economic, demographic, competitive, technological, and regulatory changes that affect the way their organization operates. Thus it is concerned with accomplishing the mission and vision of the organization. The strategic plan drives the overall corporate strategy and defines the core business strategies with respect to various aspects such as marketing, finance and operations and specifies broad guidelines and framework for the organization to operate. Hence strategic planning makes clear to the organization about what is to be done in future and it takes care of the objective of maximizing the shareholder's wealth.

2) Using the Economic Forecast on the Finance and Accounting intranet, demonstrate how forecasting has been used in the budgeting process for the most recent fiscal report. Justify your answer using the Microsoft® Excel® Operating and Cash Budgets for the most recent fiscal report on the Budgets section of the Finance and Accounting intranet. Be sure to include specific data, calculations, and/or formula details from the Excel® worksheet in your written justification.

Forecasting means estimating the future values. It is an essential tool in decision making process. Forecasting means estimating the future values. It is an essential tool in decision making process. Financial reporting is the means by which information about an enterprise is communicated. Many different users have need for financial information in order to make important decisions. These users include investors, creditors, management, governmental agencies. The financial forecasts detail the financial aspects of the corporation. The forecasting generally includes a sales forecast, the capital budget, the cash budget, pro forma financial statements, and the external financing plan. Hence forecasting will help in preparation of budgets.
Difference
Budget is more related to the allocation of resources and also include contingency plans which show alternative sources of funds if there is a shortfall in anticipated income.
A forecast is a prediction of future income and expenditure. Forecasting deals greatly with the external environment and the variables are more uncertain as compared to the Budgeting.

I have given two files:
1) Riordan forecasting file
2) Master Budget sample file

3) Describe in detail the elements of the master budgeting process which have been created in (b) above and detail what additional steps would be necessary to complete the ...

Solution Summary

This explains the steps of making budget and importance of it in shareholder's wealth maximization

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