As you are completing your budget instructions the President of the company calls you into his...

Question

As you are completing your budget instructions the President of the company calls you into his office. He is proposing that due to the amount of time it takes to complete the budget each year, the company not prepare a budget for the upcoming year but just use the existing forecast. a. He has asked your opinion on the benefits of a budget over a forecast and why his proposal won’t work. How do you respond? What are the risks associated with his proposal? What does his proposal not accomplish? Why?

David · Accepted Answer

a) The proposal of using existing forecast over budget will not be a promising proposal since 
financial forecasting forms a part of the budgeting process and has a limited scope. 
Financial forecasting analyses historical data to estimate future financial outcomes of a 
company. Budget is used for estimation of expenses and revenues which will be incurred 
in the year ahead, also it reflects the financial position, the inflows and outflows of cash,

As you are completing your budget instructions the President of the company calls you into his office. He is proposing that due to the amount of time it takes to complete the budget each year, the...

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