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Budget cycle

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Definition of Budget cycle

Budget Cycle Image 1

Budget cycle

The annual period over which budgets are prepared.



Related Terms:

Activity-based budgeting

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


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


Balanced-Budget Multiplier

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


Budget

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


Budget

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



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


Budget

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


Budget Cycle Image 2

Budget deficit

The amount by which government spending exceeds government revenues.


Budget Deficit

The excess of government spending over tax receipts.


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


Budgetary control

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


budgeted cost

a planned expenditure


budgeting

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


Business cycle

Repetitive cycles of economic expansion and recession.


Budget Cycle Image 3

Business Cycle

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


Capital budget

A firm's set of planned capital expenditures.



capital budget

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


capital budget

List of planned investment projects.


Capital budgeting

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


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


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


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 budgeting decision

Decision as to which real assets the firm should acquire.


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 conversion cycle

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


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.


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.


Consolidated Omnibus Budget Reconciliation Act (COBRA)

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


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 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.


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


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.


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 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.


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


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.


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


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.


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


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).


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


Operating cycle

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


participatory budget

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


Payroll Cycle

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


Planning, programming and budgeting system (PPBS)

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


Political Business Cycle

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


Priority-based budget

A budget that allocates funds in line with strategies.


Product cycle

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


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


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.


Replacement cycle

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


rolling budget

see continuous budgeting


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-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


Zero-based budgeting

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



 

 

 

 

 

 

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