Describe types, purposes, and uses of budgets.

Description should include

• a delineation of the major types of budgets and their uses in business decision-making and in obtaining financing (internal vs. external)
• a commentary on the uses of these tools in business decision-making and in obtaining financing (internal and external)
• definitions of the following terms
  • budget
  • balance sheet
  • income statement
  • asset
  • liability
  • owner’s equity
  • income
  • cost of goods
  • expenses
  • gross profit
  • net profit
  • zero-based budgeting
  • free-on-board (FOB) port
  • cash flow
  • audit
  • return-on-investment (ROI).

Process/Skill Questions:

• Who might have input into the budget-preparation process?
• Why is it important for a firm to use a budget?
• How are budgets used by marketing managers?
• What is the role of forecasting in the budget process?
• Why should budgets be revisited on a regular basis?
• How should unexpected costs be factored into the budget?