By regularly reviewing their budgets, businesses are able to determine if they are

following their financial plans.

The definition of a budget is

an estimate of income and expense for a specific period.

A master budget is made up of information from

specialized budgets that are generated by individual departments

A budget helps a business evaluate long-term performance by

providing benchmarks of past performance.

To make sure their budgets are effective, what should businesses do with budget information?

Communicate it to all employees

What is the relationship between a business’s goals and its budget?

Budgets translate a company’s goals into actual means for reaching them

The format of a particular budget report

can change to meet a manager’s needs

Which of the following is an advantage of a rolling budget:

It allows you to have a year-long budget in place at all times.

What is the benefit of having written records of financial transactions?

Information is accurate, accessible, and meaningful

How is a budget like a tree?

A budget is divided into categories & subcategories like to tree branches.

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BM II - Obj 5.02 (FI 106)

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Questions 25

Answers

1
By regularly reviewing their budgets, businesses are able to determine if they are
offering loans to employees.
paying interest to customers
following their financial plans.
receiving discounts from vendors.
2
Why is it important for a business to budget a certain amount of money to savings?
To prevent governmental control
To avoid financial crisis
To satisfy customers
To pay stockholders
3
The definition of a budget is
a plan for limiting your personal spending.
the key to a business’s success.
a method for evaluating a manager’s performance.
an estimate of income and expense for a specific period.
4
Which of the following is a factor that might cause a business to adjust its budget figures
Sales procedures
Economic trends
Local elections
Operating policies
5
A master budget is made up of information from
specialized budgets that are handed down from top management.
internal sales forecasts and the probable level of competition.
specialized budgets that are generated by individual departments
the previous year’s budget, with a 10% increase
6
A budget helps a business evaluate long-term performance by
comparing what/s currently budgeted to what's actually being earned & spent
providing benchmarks of past performance.
providing details of all related activities
creating a trail of management decisions
7
Comparing budgeted and actual amounts can be used to evaluate
the accounting department
employee performance
the level of competition
most aspects of a business
8
Budgets can be described in terms of
desires, debt, and discipline.
money, maps, and management.
savings, sales, and success.
account books, bills, and bankruptcy.
9
To make sure their budgets are effective, what should businesses do with budget information?
Communicate it to all employees
Post it on bulletin boards
Provide it to all top managers
Send it to all stockholders
10
What is the relationship between a business’s goals and its budget?
Goals state the big picture and are unrelated to a detailed budget.
Goals are established after the budget so that they are realistic.
Budgets reflect real business activity while goals are usually unrealistic.
Budgets translate a company’s goals into actual means for reaching them
11
To develop realistic budgets, existing businesses usually base their estimates on
government
competition
past performance
industry data
12
In most cases, a budget’s largest income category is
profit
interest.
tax
sales.
13
Why is it important for a business’s budget to be well planned?
Pricing is complex.
Time is valuable
Credit is expensive.
Money is limited.
14
Which of the following often prepare budgets in business
Middle managers
All employees
Sales cashiers
Inventory clerks
15
A quality of all specialized budgets is that they are
created independently.
driven by projected inventory
unrelated
interrelated
16
When a business owner or manager uses a budget, s/he
demonstrates leadership.
makes more informed decisions.
has to try to make it interesting.
17
The most important reason for budgeting is to
plan for retirement.
accomplish a financial goal.
save for a rainy day.
increase personal wealth.
18
The format of a particular budget report
is unique to each department and manager.
is standardized and does not change
is flexible and unimportant.
can change to meet a manager’s needs
19
Which of the following is an advantage of a rolling budget:
It sets an annual budget that does not change
It has to be consulted less frequently by managers
It allows you to have a year-long budget in place at all times.
It requires less effort than an annual budget
20
In budgeting, utility bills, salaries, advertising, equipment purchases, taxes, and loans are examples of
spending controls.
financial goals.
business expenses.
business income.
21
In business, budgets are prepared for a specific time period, usually a
fiscal year
calendar year
month at a time
quarter at a time.
22
After a business designates categories of expense in its budget, it
applies a formula
allocates a dollar amount.
attaches a time limit
appoints an accountant
23
What is the benefit of having written records of financial transactions?
Investments are increased, and profit is reinvested
Information is accurate, accessible, and meaningful
Expenses are reduced, and income is increased.
Accounting is simplified and less detailed
24
The difference between a budgeted amount and an actual amount is called
a safety net
a variance.
the balance sheet
financial evaluation
25
How is a budget like a tree?
A budget changes from season to season
A budget requires care and nurturing, like a young tree
budget is supported by strong sales like tree is supported by strong roots
A budget is divided into categories & subcategories like to tree branches.

BM II - Obj 5.02 (FI 106) Flashcards | StudBud