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Definition of operating budget
a budget expressed in both units and dollars
a plan that aggregates monetary details
A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.
planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
For investment companies, the management fee and "other expenses,"
The multiplier associated with a change in government spending financed by an equal change in taxes.
A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget.
A plan expressed in monetary terms covering a future period of time and based on a defined
a financial plan for the future based on a single level
A set of interlinked plans that quantitatively describe a company’s projected
The annual period over which budgets are prepared.
The amount by which government spending exceeds government revenues.
The excess of government spending over tax receipts.
a detailed set of documents that provides information
an intentional underestimation of revenues
the difference between total actual overhead
The process of ensuring that actual financial results are in line with targets – see variance
a planned expenditure
the process of formalizing plans and committing
A firm's set of planned capital expenditures.
management’s plan for investments in longterm
List of planned investment projects.
The process of choosing the firm's long-term capital assets.
Refers generally to analysis procedures for ranking
The process of ranking and selecting investment alternatives and
a process of evaluating an entity’s proposed
The series of steps one follows when justifying the decision to purchase
capital budgeting decision
Decision as to which real assets the firm should acquire.
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
cash flow from operating activities, or cash flow from profit
This equals the cash inflow from sales during the period minus the cash
Cash Flow Provided by Operating Activities
With some exceptions, the cash effects of transactions
Consolidated Omnibus Budget Reconciliation Act (COBRA)
A federal Act
a process in which there is a rolling
degree of operating leverage
a factor that indicates how a percentage change in sales, from the existing or current
degree of operating leverage (DOL)
Percentage change in profits given a 1 percent change in sales.
A method of budgetary control that flexes, i.e. adjusts the original budget by applying standard
a presentation of multiple budgets that
a budget developed by top management
A budget that takes the previous year as a base and adds (or deducts) a percentage to arrive at
the comprehensive set of all budgetary schedules
Net operating losses
Losses that a firm can take advantage of to reduce taxes.
Net operating margin
The ratio of net operating income to net sales.
Includes all the sales and expense activities of a business.
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from
operating cash flow
See cash flow from operating activities.
Operating Cash Flow
Income available after the payment of taxes, plus the value of the
The average time intervening between the acquisition of materials or services and the final
A term frequently used to describe earnings after the removal of the
Any expense associated with the general, sales, and administrative
The total amount that was spent to run a company this year.
The amount of money the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a factor in calculating premium rates.
Degree to which exchange rate changes, in combination with price changes, will alter a
The net income of a business, less the impact of any financial activity,
A measure of results produced by the core operations of a firm. It is common
Short-term, cancelable lease. A type of lease in which the period of contract is less than the
The rental of an asset from a lessor, but not under terms that would
One where the risks and benefits, as well as ownership, stays with the lessor.
Fixed operating costs, so-called because they accentuate variations in profits.
A relatively small percent increase or decrease in
the proportionate relationship between
Degree to which costs are fixed.
Operating Line of Credit
A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.
A loan advanced under an operating line of credit.
The profit made by the business for an accounting period, equal to gross profit less selling, finance, administration etc. expenses, but before deducting interest or taxation.
See earnings before interest and income tax (EBIT).
Operating profit margin
The ratio of operating margin to net sales.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is
operating risk (business risk)
Risk in firm’s operating income.
a budget that has been developed
Planning, programming and budgeting system (PPBS)
A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.
A budget that allocates funds in line with strategies.
an approach to budgeting that relates
see continuous budgeting
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.
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as
a comprehensive budgeting process
A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.
margin of safety
the excess of the budgeted or actual sales
The upper and lower levels of activity within which the business expects to be operating within the short-term planning horizon (the budget period).
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