BUDGET AND CAPITAL BUDGETING.

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BUDGET AND CAPITAL BUDGETING

THE WORD, BUDGET IS DERIVED FROM THE LATIN TERM,“ BOUGHETTE”. IT MEANS BAG OR CONTAINER.

SO A BUDGET IS A PREDETERMINED STATEMENT OF MANAGEMENT POLICY DURING A GIVE BAG A GIVEN PERIOD WHICH PROVIDES A STANDARD FOR COMPARISON WITH THE RESULT ACTUALLY ACHIEVE. SOMEONE SAYS IT AS THE MASTER FINANCIAL PLAN. IN FIRST, IT WAS INTRODUCED IN DRAFTING YEARLY BUDGET OF THE BRITISH GOVT. IN 1773. A BUDGET IS ADOPTED TO PREPARE IT FOR A DEFINITE PERIOD. IT CAN BE PREPARED BEFORE ITS EXECUTION. IT IS PREPLAN OF STATISTICAL DATA. IT IS PREPLANNED FOR ACHIEVING CERTAIN OBJECTS. IT SHOULD BE APPROVED BY THE GOVT. THESE ARE THE CHARACTERISTICS OF BUDGET. SUCH A BUDGET IS CHALKED OUT FOR THE ECONOMIC DEVELOPMENT OF THE COUNTRY. THIS BUDGET EXPRESSES THE PRINCIPLES AND METHODS OF GOVT. POLICY FOR HE ECONOMIC DEVELOPMENT OF THE COUNTRY. TO INSPIRE THE EMPLOYEES, TO ENHANCE EXPERIENCE, TO INCREASES THE DUTIES OF THE EMPLOYEES, REDUCING MISUSE ETC. ARE ITS OTHER OBJECTIVES. THE BUDGET PLAYS AN IMPORTANT ROLE IN DEVELOPING THE ECONOMY OF THE COUNTRY. IN CONCLUSION, IT IS SAID, THE TERM, BUDGET IS WELL KNOWN TO ALL.  EVERYONE EITHER IN THE FAMILY OR IN THE OFFICE, THERE MUST BE A BUDGET. NONE CAN THINK WITHOUT A BUDGET

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FINANCE THEORY RESTS ON THE PREMISE THE MANAGERS SHOULD MANAGERS SHOULD MANAGE THEIR FIRM’S RESOURCES WITH THE OBJECTIVE OF ENHANCING THE FIRM’S MARKET VALUE. THIS GOAL HAS BEEN ELOQUENTLY DEFENDED BY DISTINGUISHED FINANCE SCHOLARS, ECONOMISTS, AND PRACTITIONERS. HERE IS A IN A MARKET BASED ECONOMY WHICH RECOGNIZES THE RIGHTS OF PROXIMATE PROPERTY, THE ONLY SOCIAL RESPONSIBILITY O BUSINESS IS TO CREATE VALUE AND DO SO LEGALLY AND WITH INTEGRITY,. IT IS A PROFOUND ERROR TO VIEW INCREASE IN A COMPANY’S VALUE AS A CONCERN JUST FOR ITS SHAREHOLDERS. ENLIGHTENED MANAGERS AND PUBLIC OFFICIALS RECOGNIZE THAT INCREASES IN STOCK PRICES REFLECT IMPROVEMENT IN COMPETITIVENESS AN ISSUE WHICH AFFECTS EVERYONE WHO HAS A STAKE IN THE COMPANY OR ECONOMY.

SHOULD A FIRM MAXIMIZE THE WELFARE OF EMPLOYEES, OR CUSTOMERS OR CREDITORS? THESE ARE BOGUS QUESTIONS. THE REAL QUESTION IS WHAT SHOULD A FIRM DO TO MAXIMIZE ITS CONTRIBUTION TO THE SOCIETY? THE CONTRIBUTION TO SOCIETY IS MAXIMIZED BY MAXIMIZING THE VALUE OF HE FIRM.”