Feasibility Studies and Budgets Tasks of Corporate Management

The Corporate Finance Department is concerned with financial decisions and actions related to financing and investment, which ultimately lead to maximizing the value of the enterprise by maximizing the wealth of shareholders.

The main functions of corporate finance management

• The tasks are divided into.

• Issuing studies related to future planning

• Issuing studies related to making an investment decision

• Issuing studies related to project evaluation

First: Issuing studies for future planning

Planning budgets

• The concept of balancing

• Types of budgets (operational / investment / cash budget)

• Elements of the budget system

• Main functions of the budget

• Budgeting Benefits

• Application difficulties

• It is a comprehensive financial plan that defines the goals that senior management decides to achieve during the next period of time and determines the means to be followed to achieve these goals at the best possible economic cost

The achievement of the objectives is considered as the cornerstone of the system of estimated budgets and therefore there is a sufficient period to study the actual decisions of each of the technical organs of the facility and estimate its real potential on the one hand and predict the expected economic conditions on the other hand.

• With the beginning of the budget year, the administration's interest is focused on coordinating between these agencies and directing their economic resources to achieve the established goals, provided that this becomes a tight method of regular follow-up in short periodic, monthly or quarterly periods at most.

• The follow-up of implementation depends on a three-dimensional approach :

Objectively and accurately measure the results achieved at the end of each time period

Compare the results achieved with the target results for that period with a survey

Reasons for deficiencies, if any

Taking decisions that ensure the correction of the course of work in all the aforementioned agencies during the remaining periods of the budget year, and adhering to these decisions and tightening control over their implementation is imperative that requires compensating for the shortcomings that occurred and committing to achieving the full goals at the end of the budget year.

1- Operating budgets :

It is a set of lists or tables that express estimates of the various activities within the facility, and these budgets include the following set of tables:

• Sales

• Production

- Raw materials used in production

- Direct wages

- Indirect industrial costs

• Cost of goods sold

• Marketing costs

• Administrative costs

• Income Statement

• Estimated Financial Center List

2 – Investment budget :

It is a set of tables or lists that express the long-term planning of capital or investment projects or capital formation processes in the project.

3- Cash Budget :

It is a set of lists or tables that show the movement of receipts and expected cash payments and the consequent surplus or cash deficit resulting from this movement.

1. The participation of department managers, heads of departments and other officials of the facility in the development of budget estimates to ensure that the estimates set represent achievable goals in light of the possibilities available to each of these departments or sections, as well as that the actual participation of individuals responsible for the implementation of the budget is a commitment on their part to exert efforts to achieve the goals set, so all factors that determine the ability of the different departments and sections to implement the plans covered by the budget must be taken into account. One of the most important of these factors .

• The capabilities of marketing management to achieve sales goals.

• The possibility of providing departments with the required capabilities of finished and ready-made products and the associated availability of sources of purchase and financing and the availability of production capacities, raw materials and technical expertise.

2. Determine the responsibilities of each of the departments or sections covered by the facility for the results that must be achieved and the cost that is associated with those results, as the estimated budgets have a function (a tool to determine production and service programs and determine responsibility for the implementation of these programs)

3. Preparing budget estimates on the basis of an accurate economic study with the use of correct statistical methods, especially with regard to predicting the basic variables such as price levels and sales volume in all distribution areas, as the expected profit estimates require studying each of the following revenue and expense elements :

· Gross sales revenue

· Variable expenses

· Fixed expenses

· Estimated rate of income tax according to tax legislation

1 . Preparing reports to follow up the implementation of the budget in regular periodic periods in accordance with the same concepts on which the budget estimates were prepared, and it has been customary to prepare the current budget for a full year with its division into quarterly or monthly periods so that the implementation can be followed up for relatively short-term periods as it is possible to modify the programs developed and the associated elements of revenues and expenses in light of changes in the conditions of marketing, production or financing.

2. The existence of an integrated accounting system that includes the results of financial accounting as well as analytical data for costs at the level of products, production centers and services, as the financial records and cost records are considered as the main source of data, whether with regard to the preparation of the budget or the follow-up of its implementation.

3. The budget is an administrative tool that helps the administration in performing and achieving the following administrative functions:

· Planning function

· Coordination function

· Connection function

· Motivation function

· Control function

Planning means drawing plans for the future, taking into account the goals that the senior management of the facility wants to achieve, where the administration must plan if it wants to achieve the objectives of the facility, as without planning, the management did not study in advance all the expected possibilities and therefore was not ready to meet any of them through the plans it developed.

Coordination is the stage by which the plans of the different aspects of interaction are consistent with each other in harmony, and through it, the efforts of the departments and sections of the facility must be directed towards achieving the main objectives set, for example, there must be a balance between the sales plan and the production plan, otherwise the sales department may contract a large amount of units that the production management cannot implement during the agreed period

The estimated budget is one of the means used in the process of communication between the different administrative levels, it is necessary that all members of the administration know the plans of operations and the necessary timings for them, and there is no doubt that this requires the distribution of the estimated budget to all members of the administration before starting the implementation, and thus each individual is fully aware of the sub-plan for the face of the activity of the division and how the sub-plan is linked to the main plan related to the facility as a whole, thus ensuring the administration communication between the different administrative levels and thus There shall be no conflict or disharmony between the efforts of the different departments and sections.

As for the stimulus, the budget may represent a positive or negative factor, if the lower administrative levels participated in the preparation of the budget and the managers responsible for implementation were convinced of the compatibility of their facilities with the interests of the facility, this led to the achievement of the required and its impact on the stimulus was positive.

If the lower administrative levels responsible for implementation are ignored at the budget preparation stage and imposed by senior management, it may lead to negative effects on motivation and lead to ignoring the implementation of the budget and achieving its objectives.

The budget performs the control function by determining the deviation of the actual performance from the estimates set for this performance in the budget, and these deviations referred to are determined by comparing the actual performance of the activities and operations of the entity with the estimates of this performance set in the budget. In fact, determining the deviation is the first step in the process of controlling the activities of the enterprise or on the implementation of the estimates set for such activities and operations. where the determination of deviation follows four

Other key steps :-

- Deviation analysis.

- Identify the causes of deviation.

- Suggest the appropriate method of treatment.

- Preparing the necessary reports for that.

Fifth: Advantages of budgets: -

The administration is provided with a planning tool for all activities practiced within the economic unit.

The Department is provided with a coordination tool between the various activities within the economic unit.

The administration is provided with a control tool on various activities.

Helps the administration to set goals and draw up policies that ensure planning budgets to achieve the goals.

It helps to involve the different administrative levels in the development of the facility plan.

Helps to define the responsibilities and authorities of the managers responsible for the implementation of the plan.

It helps to delegate powers to executive administrative levels without senior management losing control over the facility.

Enables management to measure the efficiency of performance by comparing the actual performance and performance as contained in the budget.

Management helps to draw plans to achieve the long- and short-term project objectives.

Budgeting can be a positive driving force to achieve an organization's goals

The administration helps to stabilize the activity in the facility during the budget preparation period by solving the problems of periodic changes and seasonal changes before they occur.

It is used as a tool for effective communication between the different administrative levels in the facility on the one hand and between the accountant and administrative levels on the other hand.

Assists the Department in evaluating replacement policies and formulating future policies

Assists in planning, balancing and controlling income and expenses

• Senior management's belief that planning their own business activity is an illusion that cannot be achieved.

• The absence of strong accounting systems that allow the issuance of analyzed financial statements for several previous years through which to predict what is coming.

• Making decisions at an inopportune time.

• Lack of a responsible person (project manager).

• The absence of strong accounting systems that allow comparison between what has been planned and what has been implemented and consequently making corrective decisions.

• Lack of a clear organizational structure and mixing of responsibilities.

• The assisting departments deliberately do not reach the reports of deviations to the higher administrations.

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