Tuesday 10 April 2018

What is a budget? - Financial Budget

What is Budget? 

What is Budget?

A budget is an estimation of incomes and expenses over a specified future period of time; it is compiled and re-evaluated on a periodic basis.Typically, it is a financial plan for a defined period, often one year. This Process may to preparing detailed projections of future amounts.

What is Financial Budget?

A financial budget is a projection of incomes and outflows of the organization for the long-term as well as short-term. The strategic plan for the business firm maps out the firm's planned activities for five years in the future.


Efforts to review the financial structure of an enterprise in relation to profitability (earning ratios) is the corporate spending discretion. This is because the profitability of emerging as a result of the wisdom of spending in terms of acquiring funds or capital for finance activities the company to achieve its goals.

Includes all activities concerned with the attempt to get the funds needed by the company attempt to use those funds as efficiently as possible.

The corporate spending is all the company's activities aimed at acquiring and using of capital by way of effective and efficient.

From the definition of expenditure presented above can be said that spending covers the work done by a company to attract and collect funds with a low cost of capital and with favorable terms, as well as Live efficiently and efficiently.

Efficiency is the reverse comparison is between the input with the output and power between businesses as well as the results achieved. While effective is an attempt the highest possible achievement of an activity to achieve the goal.

Expresses in detail the significance in spending within the company as follows:

  1. Assessment of the financial position of the company
  2. Looking for short term loans and
  3. Covers problems to seek long-term loans, rate and purchase fixed assets as well as applying the wisdom of the company's dividend.
As a part of economics that payment is indeed the principles of Economics in decision-making, financial and corporate spending found widespread concerns the various aspects so that the decision spending, can affects the price level, even the smooth operations of the company as a whole.

The functions of the company's budget consists of three main decisions to be taken by the company that is spending decisions, investment decisions, and the decision on the dividends.

Investment Decision

The Investment decision is a decision related to the structure of finance and capital structure optimum financial, in order to enhance and maximize the income and the wealth of its shareholders or owners of the company, while the dividend decision the decision relating to the Division of profit against shareholders and profits on hold.

The notion that spending can be asserted that the spending was not only how to get profit but also how the use of these funds, so that effective and efficient. Such spending can be viewed as a business capital spending or withdrawing active, can also be viewed as an attempt of use of capital in this case a company owned money and lend it at another company, then called also passive expenditure, can be either quantitative (the magnitude of capital that will be pulled). the use of working capital for a certain period.

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