Vous êtes sur la page 1sur 32

BUDGETING

BUDGET (CIMA)
A plan quantified in monetary terms prepared and approved prior to a defined period of time usually showing planned income to be generated and / or expenditure to be incurred during that period and the capital to be employed to attain a given objective.

Objectives
To formulate a plan of action To provide a means of Co-ordination Facilitates central control Cost control Centralize the controlling systems Fixation of responsibilities

Budgetary Control
System which uses budgets as a means of planning and controlling all aspects of producing and or selling commodities or services. Administration of financial plan Art of executing the plan envisaged in budgets

CIMA London
The establishment of budgets relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results either to secure by individual action the objectives of that policy or to provide a firm basis for its revision.

Objectives
To ensure planning for future by setting up various budgets To Co-ordinate the various activities of different departments. To operate various cost centers and departments with efficiency and economy To take corrective measures

Essentials Requisites
Clearly defined organization Well defined policy Proper delegation of authority & responsibility Effective communication system Budget education

Logical sequence in budget preparation Participation of all employees Flexibility Motivation

Essentials of Budgetary Control


Organization of budgetary control Budget committee Budget officer Budget center Budget period Budget manual Determination of Budget Key Factor

Types of Budgets
Classified according to: Coverage they encompass Capacity to which they are related Conditions on which they are based Period which they cover

BUDGET

Coverage

Capacity

Condition

Period

Functional

Master

Fixed

Flexible

Basic

Current Long-term Short- term

Functional Budgets
Sales Budget Production Budget Purchase Budget Administration Cost Budget Capital Expenditure Budget Research and Development Cost Budget Cash Budget

Fixed Budget
Budget designed to remain unchanged irrespective of the level of activity actually attained

Fixed Budgets arent ideal


Wholly unsuitable for long period because of rigidity Unsuitable where labour cost material cost and other factors are constantly changing Cant be used where short run problems of co-ordination of activities of different sections are to be solved

Flexible Budgets
Budget designed to change in accordance with the level of activity , comparison of actual performance with budget facilitated

Fixed Vs Flexible
Remains same irrespective of the level of output Costs arent classified according to their nature Fluctuates in accordance with level of output Costs are classified according to their nature ie , fixed , variable & semivariable

If the level of activity changes , the budgeted and actual results cannot be compared because of change in basis

The budgets are redrafted as per changed volume and comparison between budgeted and actual figures will be possible

Valuation and Offer

Valuation
Use VC Method to value company
Assume IPO or acquisition Five year horizon (max) Use reasonable PE ratio to estimate FV Use reasonable discount rate Calculate equity give-up

Develop offer consistent with value

Factors Affecting Discount Rates


Total Discount Rate Risk of failure Cash Flow Adjustment adjustment Value Added Value of VC advice Investment Liquidity not liquid Systematic Risk Market sensitivity Risk-free Base Rate investment
Seed Stage 1 Stage 2 Bridge IPO
Sahlman, A Method for Valuing High-Risk, Long-Term Investments, teaching note, HBS 9-288-006.

Justifiable Discount Rate

Valuation & Offer Spreadsheet

Executive Summary

Executive Summary
Critically important First (and only?) chance to sell your concept Two pages (max) Sections match major parts of plan Cut and paste from the rest of the plan Rewrite for logic and clarity Organization
Introduction Company Overview Product/Service Description Industry and Marketplace Analysis Marketing Strategy Operations Development Financials Offering

Alternative Executive Summary


Single page Selling vs. Summary Excite quickly VCs have less time, less patience Headings
Opportunity Solution Competitive Advantage Process Positioning Revenue Financial Management