Why Are Budgets Useful in the Planning Process

question 17

Multiple Choice

Why are budgets useful in the planning process?

• A)They provide management with information about the company's past performance.
• B)They help communicate goals and provide a basis for evaluation.
• C)They guarantee the company will be profitable if it meets its objectives.
• D)They enable the budget committee to earn their paycheque.

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Definitions:

Capital Balances

The amount of money that the partners or owners of a business have contributed or acquired through retained earnings.

Partnership Liabilities

The debts and obligations for which a partnership is legally responsible, typically shared among the partners according to their agreement.

Creditors

Individuals or organizations to whom a company or person owes money for services or goods provided.

Capital Deficiency

A financial situation where a company's liabilities exceed its assets, indicating potential insolvency.