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BAAC 221 Chapter 9
The Master Budget
| Term | Definition |
|---|---|
| Strategic Planning | Setting long term goals that may extend 5-10 years in the future |
| Rolling Budget | a budget that is continuously updated so that the next 12 months of operations are always budgeted; aka a continuous budget |
| Participative Budgeting | budgeting that involves the participation of many levels of management |
| Zero-Based Budgeting | a budgeting approach in which managers begin with a budget of zero and must justify every dollar put into the budget. |
| Slack | intentionally overstating budgeted expenses or understating budgeted revenues in order to cope with uncertainty, make performance appear better, or make room for potential budget cuts. |
| Budget Committee | A committee comprised of upper managements as well as cross functional teams who review, revise, and approve the final budget. |
| Operating Budgets | the budgets needed to run the daily operations of the company. culminate in a budgeted income statement |
| Financial Budgets | the budgets that project the collection and payment of cash, as well as forecast the company's budgeted balance sheet. |
| COD | Collect on delivery or cash on delivery. Sales term indicating that the inventory must be paid for at the time of delivery. |
| Safety Stock | Extra inventory kept on hand in case demand is higher than expected or problems in the factory slow production. |
| Line of Credit | A lending arrangement from a bank in which a company is allowed to borrow money as needed, up to a specified maximum amount, yet only pay interest on the portion that is borrowed until it is repaid. |
| Sensitivity Analysis | a what if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes. |
| Flexible Budgets | budgets prepared for different volumes of activity |
| Cost of Goods, Inventory, and Purchases Budget | a merchandiser's budget that computes the Cost of Goods sold, the amount of desired ending inventory, and the amount of merchandise to be purchased. |
| Variance | the difference between actual and budgeted figures (revenues and expenses) |
| Master budget | the comprehensive planning document for the entire organization. Includes the operating and financial budgets. |
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