Posts Tagged financial direction
Do you have any business owning stocks?
Posted by admin in Companies, communication, economy, fixed costs on August 28th, 2009
At the micro level, a stock is an ownership interest in a business. The earnings from the business belong to the stockholders. Theoretically, the employees of the business, including top management, work for the stockholders.
In practice, the employees are self-interested. Every employee, from the CEO to the janitorial crew, wants as large a piece of the earnings as possible, leaving as little for you as can be justified. You may have emotional difficulty with this built-in conflict of interest.
Elaborate schemes are routinely employed to siphon off your interests. In the old days, two-thirds of profits were paid out as dividends, giving you direct control of a large portion of earnings. Today, dividends are cut or eliminated so employees can use profits as they see fit. Fewer than half of today’s stocks pay any dividends at all. Every year the number of dividend payers declines. Even those that pay dividends pay only token amounts. Instead, employees grant themselves raises and bonuses without consulting shareholders. Insider boards of directors grant themselves profit-sharing plans, stock, and stock options, all to your deficit. Board remuneration committees offer excessive pay for executives in exchange for excessive pay for themselves.
The few profits that are left are often squandered on ill-advised acquisitions and other schemes. Hundreds of examples could be cited including the recent debacles at Enron, Lucent, Rite Aid, Millennium, Color Tile, Dow Chemical, Sunbeam, Trump Hotels & Casinos, Reliance Groups, and many Internet, tech, and telecom firms that crashed in 2000-2001.
Defining Budget Type – part 3
Posted by admin in Taxes, consulting, expenditures, financial growth, management skills on July 30th, 2009
One of the major facets of budgeting is cost control, and that’s also one of the major responsibilities of company managers. Budgets are the key to cost control, but only when managers have had a hand in developing those budgets. If management doesn’t understand and use the budget, it will do a company no good. Involve all pertinent staff in the budgeting process. That allows them greater ownership of the process and enables them to better stay with the budget they’ve helped develop.
Strategic budgets help a company decide whether to invest in a business venture that may take several years to become profitable. A management consulting firm, for example, might be considering whether to develop a software division. A strategic budget would help it figure out (1) whether over the long haul this made good sense, and (2) how long it will take before the venture pays off.
Defining Budget Type – part 2
Posted by admin in Companies, Money Tips, expenditures, financial growth, production cycles on July 30th, 2009
Longer business cycles require longer-lived budgets. Even though they may be subject to review and revisions, some items or operations unfold more fully over a longer time period. This results in a longer-term or strategic budget. While the operational budget anticipates financial flow for a year or less, the strategic budget reacts more intrinsically with a company’s long-term business plan. The net effect may be a less precise, but more comprehensive approach to financial management.
Not all companies need to create a strategic budget. Your company may be one of those happy to project from year to year, knowing that retained earnings and reserves may be all you need to set the stage for the subsequent year’s financial growth. On the other hand, if the company is involved in major capital acquisition that will depreciate over time, includes extensive research and development that runs up expenses for years before any revenue might be realized from the project, or involves extensive investment plans that will take several years to bear fruit, then a strategic budget may be more appropriate.
Defining Budget Type – part 1
Posted by admin in Companies, Global Markets, budget, expenditures, production cycles on July 30th, 2009
Budgets, like business plans, come in different makes and models depending on the purpose for which a company wants to use them. If its purpose is to plan strategies for the future, the company uses a long-term budget to set general goals for the next five or ten years. If its purpose is to plan the details of its operations, the company prepares a short-term budget, generally for a single year, to translate its goals into financial terms. Whether a budget is long-range or short-range, smart managers will revise them periodically, as conditions change.
The one-year budget is most commonly known as an operational budget, designed to help a company or the departments within that company get through one more year of sales and production cycles with some semblance of financial success. The 12-month time frame does make the budget somewhat strategic in nature, but by and large its purpose is to anticipate and plan for coming issues and trends within the business year.
The Budget: Definition – part 2
Posted by admin in Companies, budget, expenditures, management skills on July 29th, 2009
Although time periods vary, 12 months is the most common
thinking at best. Anything shorter, while useful, may not anticipate all the bumps in the road a business will face.
The budget your family kept when you were young revolved around savings and expenditures, charting the ebb and flow of resources and supplies. When it comes to a company’s budget, things grow a little more complicated, but the
principles are the same. Budgets predict sales and other revenue (income) and production and operating costs (expenses), and the difference between the two (the company’s profit or loss). The budget is the tool for estimating those numbers, and hopefully help managers prevent losses. And, working in tandem or as part of the business plan, it sets goals for either or both.
Budgeting is that simple. And it’s that important.
The Budget: Definition – part 1
Posted by admin in Companies, Investment Opportunities, budget, management skills on July 29th, 2009
Chances are when you were growing up, your family had a budget, it may have included expense categories such as groceries and clothing, a little cash kept in the sugar bowl or a desk drawer, and an envelope of coupons clipped from the newspaper. That was the first experience most of us had with budgets and, in its simplest form, it’s the quintessential definition of budgeting for business.
Like any other strategic direction and business plan, every company requires a financial plan to face the future. The company and departmental budgets are manifestations of that plan, a year-long look at the peaks and valleys of sales and expenses, the projection of cash flow (or lack of same) and the financial direction a company will take over the next 12 months.