Creating and Analyzing an Operating Budget

Target Audience
Expected Duration
Lesson Objectives
Course Number

Working without a well thought-out operating budget can be compared to playing Pin the Tail on the Donkey. Although a company might know the direction in which it wants or needs to go, without a budget it must simply feel around in the dark and hope it comes close to its target. Unfortunately, if a business uses this approach, it will eventually fall victim to cash flow problems that could result in its downfall. As many would agree, the budget process in any business can be challenging and time-consuming. However, for a business to survive long-term, it must have a clear view of its goals and its means of achieving those goals. A well-planned budget is just the tool to help steer your company in the right direction--your company will be able to make critical decisions based on current facts and reasonable forecasts. In this course, you will learn the key components of an operating budget and be able to create a budget that you can manage and control. You will also learn various techniques to analyze your financial information, address variances, and, as a consequence, improve your company's operational performance and profitability.

Target Audience
Managers, assistant managers, and finance staff with budgeting responsibilities as well as non-financial executives

Expected Duration (hours)

Lesson Objectives

Creating an Operating Budget

  • recognize the value of understanding the basics of an operating budget.
  • distinguish among examples of different types of cash flow activities.
  • calculate projected revenue for a given business example.
  • match top-down and bottom-up budgeting approaches to descriptions of their corresponding advantages and disadvantages
  • identify examples of the key components of an operating budget.
  • derive the values for the key components of an operating budget for a hypothetical business.
  • Analysis of Business Profitability

  • recognize the importance of analyzing business profitability.
  • match fixed and variable costs to examples.
  • sequence examples of the steps to calculate the break-even revenue point.
  • calculate the break-even revenue point for a hypothetical company.
  • follow the procedures to calculate the profit-revenue level for a given budget plan.
  • calculate the variance percentage for hypothetical budget line items.
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