Acc 561 Guillermo Analysis

As a financial analyst it is critical to consider the risks of sales forecasts as well as the ethical implications of choosing certain methodologies in the creation and implementation of any budget. Certain ethical considerations were taken during the preparation of this budget in order to maintain its integrity and the companies’ reliability to prospective investors. Guillermo’s code of ethics requires an ethics analysis for any performance tool to avoid budgetary slack or padding. A revised budget was created for Guillermo’s company to ensure greater control over the cost control system. In efforts to be successful the flexible goals of the forecasted sales units need to be clearly communicated to the management team. The flexible budget would allow Guillermo’s company to better control the cost behavior by creating opportunities to have greater control of the product costs and guidelines for the long-term interest of the company.

Sales Forecasting and Financial Risks

There are certain risks associated with the creation of any sales forecast which result from uncontrollable variables. “The sales forecast is the most challenging part of the budget to develop accurately because the organization has little or no control over a number of factors that influence revenue-producing activities. These include the state of the economy, regulatory restrictions, seasonal demand variations, and competitors’ actions,” (Marshall, 2004). With the effective use of tools including marketing research, historical data, and competitor’s analysis managers can deflect the risks associated with such variables. Risks associated with budgets are not limited to just the sales forecasts, they also play a part in operations as well. Production budgets assume that operations will continue to run in a fashion that is indicative of past performance. Budgets cannot accommodate for unforeseen events that result in uncharacteristic performance levels. Readers and creators of budgets...