TYPES OF BUDGET PLANS

A dummy budget report of PEL for MBA students to get an understanding of how budgeting is generally done at any manufacturing company We tried to cover the types of budget plans not exactly for the said company.

There are following types of budget applications are practiced at Pak Elektron Limited:

• An operating budget
• A capital expenditures budget
• A cash flow budget

OPERATING BUDGET

An operating budget for a specific period is the detailed projection of all estimated income and expenses during a given future period. At Pak electron limited the operating budget covers, records Sales, Production costs, & other related activities. The operating budget must be reviewed, discussed, and coordinated by a press’s director, financial manager, and department managers. The director’s involvement in the budgeting process is extremely important. The director should provide subordinates with initial guidelines, review all proposals as originally submitted, request revisions, resolve differences between subordinate managers, and ensure balance and consistency in the final budget. Budgeting should be essentially a line function carried out by line managers. The financial manager and staff should provide information and other technical support, but budget negotiation and decision making should involve only those managers who are in some way responsible for a particular function.

A CAPITAL EXPENDITURES BUDGET

Capital Expenditures is referred as amount of money needed to spend on capital items or  fixed assets such as land, buildings, roads, equipment, etc. that are projected to generate income in the future. Capital expenditures to be budgeted include replacement, or construction of plants and major equipment. Plan prepared for individual capital expenditure projects. The time span of this budget depends upon the project. Capital expenditures to be budgeted include replacement, acquisition, or construction of plants and major equipment.

In the year under review gross turnover reached at Rs. 6,077 million, which is higher by Rs. 2,094 over the last year showing an increase of 53%. The net profit reflects an increase of Rs. 136 million (96%) on the comparative financial results.

A CASH FLOW BUDGET

A cash flow budget is that which provides an overview of cash inflows and outflows during a specified period of time. This is often called the cash flow, or the cash flow budget.

A cash flow budget is a useful management tool because it:

• Forces you to think through your production and marketing plans for the year.
• Projects your need for operating credit and your ability to repay borrowed funds.
• Projects when you must borrow money and when you can repay it
• Helps you control your finances. By comparing your budget to actual
• Cash flow, you can spot developing problems because of an unexpected
• Drop in income or unplanned expenses, and spot opportunities
• To save or invest funds if net cash flow is higher than expected.
• Helps you communicate your farming plans and credit needs to your

CASH FLOW BUDGET STATEMENT

• If your total projected net cash flow for the year is negative, there are a number of annual adjustments you can make.
• Sell more current assets (crops and livestock). Be careful here, though. Reducing inventories may solve the cash flow squeeze this year, but result in even more severe problems next year.
• Finance capital expenditures with credit, or postpone them until another year.
• Try to reduce the size of intermediate and long-term debt payments by lengthening the repayment period or adding a balloon payment at the end.
• Convert carry-over short-term debt to intermediate or long-term debt by refinancing.
• Reduce non-farm expenditures, or increase non-farm income. Sell intermediate or long-term assets.
• Even when your yearly net cash flow is positive

Some farm business managers operate with a line of credit from their lender, with a maximum borrowing limit, instead of borrowing funds in fixed amounts.