questions and short answers

Business & Finance
Tutor: None Selected Time limit: 1 Day

  • What is the difference between forecasting and budgeting?
  • What is the difference between an operating budget and a cash budget?
  • Explain what zero-based budgeting is and how it can improve the efficiency of the organization?
Jun 2nd, 2015

Please let me know if you need any clarification. I'm always happy to answer your questions.


What is the difference between a budget and a forecast?

In essence, a budget is a quantified expectation for what a business wants to achieve. Its characteristics are:

  • The budget is a detailed representation of the future results, financial position, and cash flows that management wants the business to achieve during a certain period of time.
  • The budget may only be updated once a year, depending on how frequently senior management wants to revise information.
  • The budget is compared to actual results to determine variances from expected performance.
  • Management takes remedial steps to bring actual results back into line with the budget.
  • The budget to actual comparison can trigger changes in performance-based compensation paid to employees.

Cash flow budget means how much cash a company need enable to support the normal operation cycle (usually depending on the industry). 

Vs 

Operation Budget means the overall inventory (Cash, assets, etc) need to maintain the operation cycle.

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jun 2nd, 2015

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