Financial Management & Budgeting Flashcards

What is the primary purpose of a budget in an organization?

Answer: To plan and control financial resources

A budget serves as a financial plan that helps organizations allocate resources, set spending limits, and measure actual performance against targets.

Which financial statement reports a company's revenues and expenses over a specific period?

Answer: Income statement

The income statement (also called the profit and loss statement) summarizes revenues, costs, and expenses to show net profit or loss over a reporting period.

What does ROI stand for in a financial context?

Answer: Return on Investment

Return on Investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested.

Variance analysis in budgeting is used to compare what?

Answer: Actual financial results against budgeted figures

Variance analysis identifies and explains the differences between planned budgeted amounts and actual financial results to support corrective action.

What is a capital expenditure (CapEx)?

Answer: Money spent on acquiring or upgrading long-term assets

Capital expenditures are funds used by a company to acquire, upgrade, or maintain long-term physical assets such as equipment, buildings, or technology infrastructure.

What is the purpose of a cash flow statement?

Answer: To show changes in cash and cash equivalents over a period

The cash flow statement tracks the inflows and outflows of cash from operating, investing, and financing activities to show a company's liquidity position.