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Finance & Accounting
Pages 6 (1506 words)
The management of a company’s finances is an important element to any corporation as it hinges on the potential of success and failure of a business. The best way of ensuring that this management is done appropriately is through the process of budgeting (Obstfeld, 2008).
Budgeting can be described as the careful planning of an organization’s funds based on the various costs and expenditures that a business faces and the means in which these funds will be distributed amongst them (Lasher, 2010). A simpler and straight forward explanation would be that budgeting is simply the development of a budget. A budget can be defined as an economic plan for a certain period of time according to available funds (Obstfeld, 2008). A company cannot function without budgeting, and it is essential that the methods and techniques used during this process are appropriate to the business in particular in terms of the approach and objectives that feature in that particular organization (Bartle & Shields, 2008). Good budgeting results in financial success for that particular accounting period and will reduce the risk of a company mismanaging the funds that are available to them which in serious situations could lead to disastrous results if not kept in check such as bankruptcy among others (Lasher, 2010). Once a proper budgeting plan has been established, however, these risks have a higher chance of being avoided and put the company in a better position to maintain their position in terms of economic stability. ...
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