Abstract
The objective of this project is to develop a decision support system (DSS) for expenditure budgeting. The system will support current expenditure budgeting according to the same principles as the fixed expenditure (capital) budgeting. The framework of the analysis is based on an ex ante version of the traditional (ex post) du Pont system presenting the profitability of the firm as a function of asset turnover and profit margin. The present approach depicts the relationships between sales and the alternative classes of expenditure, expenses and assets by means of a mathematical model expressed as a DSS in an EXCEL spreadsheet framework. The model assumes that the average absorption time and revenue lag structure for expenditure classes are constant in time. However, the monetary productivity of expenditures is a second-order parabola of the amount of expenditure. The use of the model is demonstrated in two illustrative cases (SIEMENS and ABB) using published financial statement data. The estimation of the revenue function is based on an interactive analysis and simulation with past data.
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