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Finance & Accounting
Pages 7 (1757 words)
Budgeting Heather Jenks BUS630 Managerial Accounting Moustafa Ahmed January 7, 2013 Budgeting Budgeting is the process of monitoring and controlling the allocation of corporate funds to activities that support day-to-day business operations, sustain the viability of the business in the long run, and aid the business in recovering control of financial resources…
(Davis & Davis, 2012) Industry context determines the particular risks that affect the budgeting process and outcomes in certain businesses. In the airline industry, fuel price volatility constitutes an external risk that significantly affects the budget of airlines. Fuel hedging is a strategy practiced in the airline industry to stabilize the budget and offset risks involved in changing prices. Fuel hedging can result to benefits and/or downsides relative to the budget of airlines. Fuel hedging does not ensure absolute positive results for all firms and in all circumstances. Budgeting is a complex process influenced by various factors that could lead to different outcomes. There are lessons to be learned by considering budgeting in the context of fuel hedging in the airline industry. The succeeding discussion focuses on the issues involved in budgeting by taking the case of the airline industry. Lessons on budgeting are drawn and practical applications are identified. Main Issues in Budgeting Budgeting should be realistic and based on a thorough analysis of a firm’s financial needs, current and expected revenue generation, and business objectives (Davis & Davis, 2012). ...
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