Building Financial Models with Microsoft Excel
A Guide for Business Professionals
Chapter One
Overview of Budgets
and Financial Models
BUDGETS
The Cambridge Dictionary defines a budget as "a plan to show how much
money a person or organization will earn and how much they will need or
be able to spend." Businesses use several different types of budgets to manage
their operations. Whatever form various budgets may take, the primary
goal of all budgets is to provide a tangible and quantifiable estimate of the
receipt and allocation of resources. In the context of this book, a budget
represents a core element of a financial model; financial models are discussed
later in the chapter.
Businesses use several types of budgets for planning purposes. These
budgets are typically categorized by the timeframe that they cover. A "long-range
plan," one type of budget, typically forecasts financial statements out
5 to 10 years into the future. Long-range plans usually evolve from "strategic
plans," which define the overall mission and goals for a business. These
long-range plans are coordinated with Capital Budgets, which map ... read full excerpt from Building Financial Models with Microsoft Excel: A Guide for Business Professionals ebook
