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Managerial Budgeting

Managerial Budgeting. Introduction to Management 340 Budget Analysis. Why know finance?. 401k or 403b? Buy verse lease argument? Personal daily budget? The cost of turnover? White Collar Crime. Introduction.

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Managerial Budgeting

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  1. Managerial Budgeting Introduction to Management 340 Budget Analysis

  2. Why know finance? • 401k or 403b? • Buy verse lease argument? • Personal daily budget? • The cost of turnover? • White Collar Crime

  3. Introduction • A budget is a plan for using limited resources within a specific time and specify the goals we hope to achieve during this period • Budgets have three functions • Planning • Coordination • Control

  4. Let us take a step back first • Budgets revolve around decision making so let us first discuss decision making.

  5. Six Steps to Decision Making • Plan -Setting objectives (or) goals • Coordinating and Communicating - Identify options • Measure benefits (advantages), measure costs (disadvantages), to determine the value of each option • Make the decision with the highest value • Monitoring progress – Control • Evaluation

  6. Goals – Step One • Specific • Measurable • Achievable • Relevant • Timed • In Personal Finance I make every student create 3 linked goals • Save a 6 month emergency fund • Lower my monthly variable cost • Increase my cash flow

  7. Options – Step Two • Indentifying options is difficult • This requires the knowledge and experience as well as some critical thinking skills • Here is your first assignment • Write down all your expenses both fixed and variable over the next 30 days.

  8. Personal Budget The creation of budgets can be difficult. It requires much critical thinking skills.

  9. Master Budget

  10. Determine Value – Step Three • Value = Benefits – Cost • Cost and opportunity cost are easy to calculate • Opportunity cost is the value of the next best choice that one gives up when making a decision • Examples of opportunity cost?

  11. Highest Value – Step Four • V = B – C • Define ethics • Where does ethics play into this step? • Cyanide Leaching in the Black Hills of South Dakota • Goal discrepancies within organizational missions is important to understand

  12. Goals Discrepancies • Profits organizations • JNJ, F, YUM, GOOG, DIS, MO, GE • Not-for-profit organizations • Red Cross, Habitat for Humanity, Norton, local, state, and federal governments

  13. For-Profit and NFP Mission Not-for-Profit For Profit Earn a profit! Ensure a profit to stockholders at a return commensurate of the risk. The four financial statements are analyzed to check if they are focused on the “bottom line”. Since a NFP statements contain monetary data nonfinancial data is also given • Provide specific services at a targeted groups of constituents advocating a political or social cause, carrying out research or other activities for the betterment of society. A relationship exist between both groups. It is difficult to quantify services

  14. Monitoring Progress – Step Five • In statement analysis we will discuss more on goal discrepancies and analyzing for these differences • Actual – Budget = difference • Variance Analysis

  15. Evaluation – Step 6 • As mentioned with an earlier slide, you must track YOUR expenses over the next days after which you will write a quick summary. This is your evaluation step.

  16. Outline of Course • The main objectives of this course • Understand and create a budget • Identify and analyze financial statements for profit organizations • Calculations of a variety of financial and statistical math problems required with a budget • Apply to fraud cases (White Collar Crime) • Assistant management making decision on hiring based upon financial measurements

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