Under What Situation Might a Budget Be Most Effective

question 34

Multiple Choice

Under what situation might a budget be most effective?

• A)As a tool to assess blame when costs are too high
• B)When used to evaluate a manager's performance
• C)Budgets are equally effective in all situations.
• D)When it is created by top management

---

Definitions:

Average Rate of Return

This financial ratio measures the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Estimated Annual Net Income

The projection or forecast of a company's net income over a one-year period, considering all expected revenues and expenses.

Straight-Line Depreciation

A method of allocating the cost of a physical asset evenly over its useful life.

Average Rate of Return

The ratio of the average annual profit to the initial investment, expressed as a percentage, used to assess the profitability of an investment.