How would an organisation decide which budgeting technique to use?
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An organization decides on a budgeting technique based on various factors such as the size of the enterprise, complexity of projects, and preferences of financial managers. Research indicates that financial managers often favor methods like Internal Rate of Return (IRR) or Payback Period (PP) . Larger enterprises tend to lean towards more complex methods for evaluating capital budgeting projects . Additionally, the choice of budgeting technique can be influenced by the need to consider both quantitative and qualitative factors in project appraisals . Variances in budgeting practices among companies and industries are attributed to factors like business nature, market dynamics, and specific company policies . Ultimately, the selection of a budgeting technique should align with the organization's objectives and provide a balance between income and expenses .
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| Papers (4) | Insight |
|---|---|
| Organizations decide on budgeting techniques based on factors like effectiveness, industry trends, and flaws in traditional methods. Real option analysis is highlighted as a sophisticated and efficient approach. | |
16 Citations | Organizations typically choose capital budgeting techniques based on factors like project duration and complexity, with larger enterprises favoring more intricate methods like NPV. |
| Organizations decide on budgeting techniques based on factors like general or partial budgets, departmental budgets, product/project/activity budgets, fixed or flexible budgets, aligning with strategic management objectives. | |
3 Citations | An organization can use an integrated AHP-LP model for capital budgeting, combining quantitative and qualitative factors to prioritize projects and allocate capital optimally for maximizing profit and meeting objectives. |
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