Definition of Budget cycle

Budget cycle

The annual period over which budgets are prepared.

Budget

A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget.

Budget deficit

The amount by which government spending exceeds government revenues.

Business cycle

Repetitive cycles of economic expansion and recession.

Capital budget

A firm's set of planned capital expenditures.

Capital budgeting

The process of choosing the firm's long-term capital assets.

Cash budget

A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
expected cash and loan balances.

Cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash
from accounts receivable.

Cash cycle

In general, the time between cash disbursement and cash collection. In net working capital
management, it can be thought of as the operating cycle less the accounts payable payment period.

Expiration cycle

An expiration cycle relates to the dates on which options on a particular security expire. A
given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any
point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2
in far-term months.

Market cycle

The period between the 2 latest highs or lows of the S&P 500, showing net performance of a
fund through both an up and a down market. A market cycle is complete when the S&P is 15% below the
highest point or 15% above the lowest point (ending a down market). The dates of the last market cycle are:
12/04/87 to 10/11/90 (low to low).

Operating cycle

The average time intervening between the acquisition of materials or services and the final
cash realization from those acquisitions.

Product cycle

The time it takes to bring new and/or improved products to market.

Replacement cycle

The frequency with which an asset is replaced by an equivalent asset.

Activity-based budgeting

A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.

Budget

A plan expressed in monetary terms covering a future period of time and based on a defined
level of activity.

Budgetary control

The process of ensuring that actual financial results are in line with targets – see variance
analysis.

Flexible budget

A method of budgetary control that flexes, i.e. adjusts the original budget by applying standard
prices and costs per unit to the actual production volume.

Incremental budget

A budget that takes the previous year as a base and adds (or deducts) a percentage to arrive at
the budget for the current year.

Lifecycle costing

An approach to costing that estimates and accumulates the costs of a product/service over
its entire lifecycle, i.e. from inception to abandonment.

Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.

Priority-based budget

A budget that allocates funds in line with strategies.

Rolling budgets

A method of budgeting in which as each month passes, an additional budget month is added such that there is always a 12-month budget.

Zero-based budgeting

A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.

capital budgeting

Refers generally to analysis procedures for ranking
investments, given a limited amount of total capital that has to be allocated
among the various capital investment opportunities of a business.
The term sometimes is used interchangeably with the analysis techniques
themselves, such as calculating present value, net present value,
and the internal rate of return of investments.

Capital Budgeting

The process of ranking and selecting investment alternatives and
capital expenditures

activity-based budgeting (ABB)

planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
quality of production

budget

a financial plan for the future based on a single level
of activity; the quantitative expression of a company’s commitment
to planned activities and resource acquisition and use

budgeted cost

a planned expenditure

budgeting

the process of formalizing plans and committing
them to written, financial terms

budget manual

a detailed set of documents that provides information
and guidelines about the budgetary process

budget slack

an intentional underestimation of revenues
and/or overestimation of expenses in a budgeting process
for the purpose of including deviations that are likely to
occur so that results will occur within budget limits

budget variance

the difference between total actual overhead
and budgeted overhead based on standard hours allowed
for the production achieved during the period; computed
as part of two-variance overhead analysis; also
referred to as the controllable variance

capital budget

management’s plan for investments in longterm
property, plant, and equipment

capital budgeting

a process of evaluating an entity’s proposed
long-range projects or courses of future activity for
the purpose of allocating limited resources to desirable
projects

continuous budgeting

a process in which there is a rolling
twelve-month budget; a new budget month (twelve months
into the future) is added as each current month expires

cycle time

the time between the placement of an order to
the time the goods arrive for usage or are produced by
the company; it is equal to value-added time plus nonvalue-
added time

financial budget

a plan that aggregates monetary details
from the operating budgets; includes the cash and capital
budgets of a company as well as the pro forma financial
statements

flexible budget

a presentation of multiple budgets that
show costs according to their behavior at different levels
of activity

imposed budget

a budget developed by top management
with little or no input from operating personnel; operating personnel are then informed of the budget objectives and constraints

life cycle costing

the accumulation of costs for activities that
occur over the entire life cycle of a product from inception
to abandonment by the manufacturer and consumer

manufacturing cycle efficiency (MCE)

a ratio resulting from dividing the actual production time by total lead time;
reflects the proportion of lead time that is value-added

master budget

the comprehensive set of all budgetary schedules
and the pro forma financial statements of an organization

operating budget

a budget expressed in both units and dollars

participatory budget

a budget that has been developed
through a process of joint decision making by top management
and operating personnel

product life cycle

a model depicting the stages through
which a product class (not necessarily each product) passes

program budgeting

an approach to budgeting that relates
resource inputs to service outputs

rolling budget

see continuous budgeting

zero-base budgeting

a comprehensive budgeting process
that systematically considers the priorities and alternatives
for current and proposed activities in relation to organization
objectives; it requires the rejustification of ongoing activities

Budget

A set of interlinked plans that quantitatively describe a company’s projected
future operations.

Capital budgeting

The series of steps one follows when justifying the decision to purchase
an asset, usually including an analysis of costs and related benefits, which
should include a discounted cash flow analysis of the stream of all future cash flows
resulting from the purchase of the asset.

capital budget

List of planned investment projects.

capital budgeting decision

Decision as to which real assets the firm should acquire.

cash conversion cycle

Period between firm’s payment for materials
and collection on its sales.

Balanced-Budget Multiplier

The multiplier associated with a change in government spending financed by an equal change in taxes.

Budget Deficit

The excess of government spending over tax receipts.

Business Cycle

Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.

Political Business Cycle

A business cycle caused by policies undertaken to help a government be re-elected.

Real Business Cycle Theory

Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal Act
containing the requirements for offering insurance to departed employees.

Payroll Cycle

The period of service for which a company compensates its employees.

Cycle counting

The frequent, scheduled counting of a subset of all inventories,
with the intent of spotting inventory record inaccuracies, investigating root
causes, and correcting those problems.

Cash Cycle

The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.

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