Goals of budgeting and the steps required to build a Budget -

Budgeting serves several critical goals within an organization, as outlined in Baker’s Health Care Finance. Firstly, it enables the planning of financial activities in the move of resources from unproductive to productive basis as well as forecasts future events (Ross, 2022). The next goal is communication and coordination between departments, which involves the integration of the budget with the overarching objectives of the entire organization and the overall organizational goals. As a result, alignment and synergy between different sectors of the organization are achieved.

Moreover, budgeting is used as a control for tracking progress against financial objectives within the budgeting period. This ensures crucial supervision and performance assessment for the financial targets and financial goals. This is an advantageous function since it stimulates self-regulation and the establishment of a budget and a saving program.

b). Steps required to build a budget

Establish Objectives: Establish what the budget is for, its duration and level of detail.
Gather Information: Data on historical financial performance, market financial trends, operational activities such as plans, and other factors should be obtained.
Identify Revenue and Expenses: The forecasts should be made for sales, investments, and grants, while the expenses should be estimated for salaries, supplies, overhead costs, and the like.
Allocate Resources: Discount the cost among diverse activities, including departments and projects, according to the need.
Monitor and Adjust: On a regular basis, confirm if the situation that has been budgeted for is actually what is happening and take the course corrections that may be necessary.

How contribution margin and break-even analysis are calculated. What are those important?

Contribution margin reveals the amount of fixed cost expenses that can be covered and leaves profit after the variable cost expenses are taken into account (Paff, 2021). On the other hand, Sales Volume Break-Even Analysis assists in ascertaining the sales figure to avoid extra losses and be even with income.

b). Calculations:

Contribution Margin = Sales Revenue – Variable Costs (Paff, 2021)

Break-Even Point (Units) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit), or, Break-Even Point (Units) = Total Fixed Costs / Contribution Margin per Unit

c). Importance:

Determine Profitability: A business can measure its profitability by figuring out the ideal level of sales that will cover the costs. It can also set appropriate targets.
Make Pricing Decisions: The break-even point information helps one to set proper prices for products and services in order to attain profit.
Assess Risk: Break-even analysis includes learning about the financial risk related to either high or low sales and cost structures.
Evaluate Performance: Companies can compare actual sales to the break-even point in order to determine their financial performance and make strategic choices that allow them to solve efficiency and profitability problems.
What is financial benchmarking?

Financial benchmarking refers to the evaluation of an organization’s standards of financial performance as measured in terms of metrics, ratios, or practices, which are then compared against those of its peers, competition, and industry norms. Such a comparative procedure can determine the strengths, vulnerabilities, and weaknesses of the company when comparing it to its competitors in the same sphere of business.

Why the value of monies received in the future is lower than the value of the same money today.

The value of money as a result of the time value of money will also decrease in future as the time elapses (Ross, 2022). This is because:

Earning Potential: Interest accumulated today is an investment that can be compounded and will earn you more interest in the long run (Ross, 2022). The traditional approach only takes into account the value of money spent today, but it needs to account for the possibility of growing the wealth in the future.
Inflation: Unlike most currencies, inflation, which erodes the purchasing power of money over time, does not apply to cryptocurrencies. Inflation will make a dollar today to buy more items and services than it will when it becomes a dollar tomorrow.

Referencess

Paff, L. (2021). 7.1 Exploring Contribution Margin. Psu.pb.unizin.org. https://psu.pb.unizin.org/acctg211/chapter/exploring-contribution-margin/

Ross, T. K. (2022). Baker’s Health Care Finance: Basic Tools for Nonfinancial Managers. Jones & Bartlett Learning.