My Big Fat Revision

Explain the factors that might influence the size of Tregory Growers Ltd’s budget for marketing expenditure for the next financial year. One factor that might influence the size of Tregory Growers’ budget for marketing expenditure is the financial position of the company. The Director of Finance says that they are already increasing their borrowing by £10m and already have a shortage of working capital. They also have current liabilities worth £9.4 million. This is likely to affect Tregory Growers’ marketing budget because it hints at potential cash flow issues and could lead to low profitability. This may call for the marketing expenditure to be restricted in order to retain a strong financial position going into the future. This said, the company could take a risk and have a large marketing budget with the hopes it would pay off and translate into profit; appendix A shows a weak positive correlation because marketing budget size and sales which may push Tregory Growers to see it ...

Value of Budgeting Reasons for setting budgets To gain financial support – a good business plan, incorporating clear budgets that indicate a good chance of success is vital in persuading potential bankers to invest. The quality of a budget can therefore be critical because without it a new business may never be able to get started. The more detail it contains, the more reassurance there is for financial backers looking for a carefully planned business venture. To ensure that a business does not overspent – careful control of budgets will ensure that a firm’s finances do not worsen unexpectedly, as a result of a failure to limit spending to agreed levels. To establish priorities – a budget plan is for the future, allocating a large budget can indicate the level of importance a policy or division has. This sends a clear message to stakeholders. To encourage delegation and responsibility and to motivate staff – budgets mean that junior managers can be budget hold...