However, with budgeting, management can easily see how much money is available for projects and what the most pressing issues of the company are. Without the budget, the company is doomed as it is unable to account for its cash flow and revenue streams (Sullivan, 2003).

Also, various financial models can be used to aid management. These tools can include sensitivity analysis and regression analysis. Sensitivity analysis in particular is a very crucial component within the overall business strategy of a firm. Sensitivity analysis helps properly forecast adverse scenarios under various market stressors. It also allows management to determine what variables have the greatest impact on the strategic outcome. Management must determine where capital should be deployed in the underlying business. Through budgeting management can determine to what extent capital should be deployed in a particular business. Budgeting is the foundation for proper financial planning. Through proper budgeting, financial planning...
[ View Full Essay]