[Solution] Step 1: Financial Control
Created at:
Author: Emily Carter
Financial control manages resources as they flow into, are held by, and flow out of the organization. Budgets are a critical tool for this control.
Types of Budgets
- Financial budget: Describes cash sources and usage plans
- Operating budget: Details products/services and required resources
- Nonmonetary budget: Expressed in units like hours or square footage
In general terms, what is a budget?
View Explanation
A budget is a plan for future activity expressed in numbers, usually in dollars or other currency, for the entire organization, units, or specific projects.
Which statements about budget development are true? Check all that apply:
- Unit budgets are communicated to appropriate managers
- Budgets are developed entirely by top managers
- Multiple levels of review check for errors
- Budget committee includes controller and CEO
View Explanation
Budgets are developed at operating unit levels, go through multiple reviews, and are approved by top leaders including CEO and controller before being communicated back to unit managers.
Which are disadvantages of using budgets? Check all that apply:
- Making accurate budgets can be time-consuming
- Managers may be reluctant to change budgets
- Budgets can limit innovation
- Budgets use different units making comparisons difficult
View Explanation
Disadvantages include time-consuming development, reluctance to change when circumstances require it, and potential innovation limitations by locking in resource expenditures.
