FINANCIAL ANALYSIS

Financial Analysis

[Name of the Institute]Financial Analysis

Question # 1

Introduction

The companies that are operating in the static and the stable market place are using the traditional budgeting because the traditional budget starts with a list of income and the expenses of the income. The organization adjusts the spending level of the income and tries to live the goals of the budget for the rest of the year. On the other hand the companies that are using the traditional budgeting and are operating in the dynamic market place, then there are many disadvantages because the traditional budget is completely based on the traditional approach. Following are the disadvantages of the traditional budgeting as it is not beneficial for both of the companies that are operating in the stable and the dynamic market place.

Discussion

No Projection

The traditional budgeting is based on the static condition and therefore the companies spend according to their plan and the guess that are made in the start of the year. The budget that is being more progressively made analyzes (Finkler, 2012) the monthly spending that will be compared according to the amount of the budget and also indicates that there will be no ending if the companies income and the level of spending continues at the existing level.

Lack of flexibility

In order to plan for the spending, fixed amount is used by the traditional budget. If the income changes this will not be taken into the account of the traditional budgeting. Use of the percentages for the set of various level of the spending will help in order to contribute when in need in more particular goals when having the opportunity. Similarly a company that is operating in the static and the stable market place with the changing demand, or the company that is operating in the dynamic condition, if the income changes then using the traditional costing the income will not be taken into account either the income changes.

Budget Document

If the companies having the traditional documents of the budget, month of the year at the top and the income and the expenses are at down on one side. In the end of the month row, the budgeted and the total column that allows to tackle the track the expenses and also indicates how much used during the year. The budgeted monthly, (Brownell, 2003) average monthly and the Projected columns, in the each month this can be compared with the monthly number in order to see if there is need to make any further adjustments for the plan annually. If the monthly tracks records are kept, the expenses allows to see what the number at the end of the year if the spending continuous at the same rate.

Inefficiency

There is too much time that is being consumed by the resources of the management. Hence only small number of the parties that are being involved in the process of the budgeting that thinks that the time that is being spend is worthwhile. The fundamental reason is that the traditional budgeting takes too much ...