Question

Address each of the following elements in your discussion post and support your answers with credible sources. Cite your sources properly in APA format (both in-text and reference entries). Discuss the importance of budgets for an organization or department. Explain the basic concept of free cash flow.

Answer 1

Following are some advantages of budgeting:

It defines the objectives of a business for a specific period.

It forces managers to do better forecasting as they have to put their predictions into forecasts.

It is important to create business plans.

Budgeting helps to make capital and revenue resources profitable.

It helps in controlling income and expenditure of a business.

It allows you to save for expected and unexpected costs.

Efficient budgeting plan creates an environment of earning profits throughout the business.

Through budget control, every problem in the organization solves with a systematic and disciplined approach.

The foremost thing of budgeting is, it leads to discipline in the organization which is important for managerial responsibility.

Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital.