Fiscal budget



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Fiscal budget



The study of the financial statements of a particular enterprise or project, in order to know its sources of cash and expenses, and to convert these data into information useful in the process of analysis and diagnosis to make appropriate financial decisions is the content of financial analysis in any enterprise or project, and the financial budget is one of the most important elements of financial analysis because it contains important financial data and information that is the basis for the study of the financial situation of the enterprise or project during a given period.


Volume 0% The financial budget is defined as a statement showing the management of the enterprise or the company its resources (assets) and its costs (liabilities) within a specified period of time, and takes into account the order of the elements of the assets according to the degree of liquidity, and the order of the elements of liabilities according to the degree of maturity plus the value of the property rights, provided that the accounts of assets, liabilities and property rights achieve a balance in their value, and this balance appears according to the following equation :

Total assets = total liabilities + shareholders' equity




Elements of the fiscal budget



The financial budget comes in the form of a table containing two aspects that require equal, as one represents the assets of the company or establishment, and the other represents liabilities, and may come in the form of a one-sided table, where the assets are listed first and followed by the accounting of the company or establishment, and the following is an explanation of the elements of the financial budget:



Assets: Are the assets and property of a company or establishment for which financial income is provided, and the assets are divided into:

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  • Current assets: Includes the assets and assets of a company or establishment that can be converted into cash by sale or depreciation within one year or during the regular session, such as the funds in the fund or treasury, current accounts in banks, goods or goods, shares, bonds, receivableincome and prepaid expenses.

  • For the assets of the thaba: the assets and property of a company or establishment that is permanent, i.e. long-term, and is not for sale or cash as in current assets, for example buildings, land, furniture, brand, transport, production machinery and equipment.

  • Liabilities: Liabilities are liabilities or claims due to the company or establishment, and the liabilities come in two types:

  • Current liabilities: Liabilities payable to a company or establishment within one year, examples of current liabilities include wages and salaries of employees, short-term loans, taxes, and supplier debts.

  • Long-term liabilities: The liabilities of a company or enterprise that is payable for more than a year, such as long-term or medium-term loans.

  • Equity: Equity represents the real value of individuals' share in a company or company, and investor participation in the company's profits, participation in the selection of the company's management, and the right to vote in meetings are among the most important rights of these investors.



Fiscal budget objectives



The use of the financial budget in enterprises and companies is evolving due to the multiplicity of objectives of:


  • Determine how funds and revenues are distributed to the company's various activities in order to provide a correct business plan, such as the purchase of fixed assets.

  • Provide a comparison of the results in the budget, measure employee performance, take corrective action, and improve the company's future plans.

  • Provide more than one budget based on several different circumstances, and predict the financial results of each potential route, so that the organization can choose the right path for it.

  • Expect the company's cash flows, especially those with seasonal sales or irregular sales methods, so the financial budget is useful and reasonable in predicting profits in the short period ahead.

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  • The financial budget provides a management guide to making appropriate decisions and solutions in modifying the company's financial plans and objectives.



Financial budget functions



The main objective of the accounting business is to prepare financial reports, and the financial budget is one of the most important, because of its importance in providing a basis for financial information that contributes to decision-making in any company or institution, as well as monitoring financial resources through performance measurement, as well as contributing to financial planning, in addition to other functions, including:



  • Prediction: It is a calculated prediction of the course of action, so that it helps the company to be prepared and predictable for what is to come, several statistical tools have been developed that help improve the forecasting process, and there are several conditions that affect the forecast such as government actions and the relationship between price and demand, economic outlook, competition and others.

  • Planning: The forecasts and projected data we have obtained from the forecast function, and the reliability of them in making appropriate decisions about future fiscal policy making, are used to move forward with the implementation of what has been planned.

  • Communication: Means collecting the data and facts necessary for the course of work as planned, from employees and different management levels, exchanging data and facts, then analyzing them and accessing information that will continue the financial achievement planned.

  • Evaluation: The evaluation process is one of the processes performed by any organization in order to compare actual performance with the objectives achieved, so that the lack of interest in this aspect will harm the company over time.



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Financial budget analysis


The budget for any facility contains a set of data, which must be converted into information, in order to be used to properly manage the business and make decisions, and this is done through analysis using financial ratios, such as:

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Current ratio (trading ratio): the liquidity ratio used to assess the ability of the enterprise to convert its property from current assets into cash, for the purpose of paying the obligations owed by the establishment, as the trading ratio measures the ability of the enterprise to meet the current obligations by providing cash, and is calculated in the following equation:


Trading Ratio = Current Assets Current Liabilities Quick Liquidity Ratio:

This ratio refers to the ability of the enterprise to pay its current obligations from its easy-to-convert assets, such as securities, stocks, bonds and all traded assets, but the inventory is excluded because of the difficulty of converting it into cash, and this ratio is calculated through the following equation:


Quick liquidity ratio = (traded assets-stock) current liabilities

Working capital ratio: From the measures of the financial liquidity of the enterprise, through which it is determined whether the enterprise is able to repay the loans, and expressed through the following equation: Working Capital = Current Assets - Current Liabilities Leverage Ratio: Is the extent to which the enterprise is dependent in financing its business through loans and debts, where it helps determine the amount of financial dues of the company, and is calculated based on the following equation. :


Leverage ratio = total liabilities7;net value