The Practical Importance of Budgets Is That

question 37

Multiple Choice

The practical importance of budgets is that

• A)senior executives and divisional managers are held accountable against the figures in these budgets.
• B)the CEO is accountable to shareholders and analysts against these detailed predictions.
• C)the individual figures don't matter, it is the process by which the numbers were reached that matters.
• D)a and b.

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Definitions:

Cash Excess

Situations where an entity has more cash available than is immediately needed for operational expenses.

Minimum Cash Balance

The smallest amount of cash that a company aims to hold in its cash account to meet operational needs.

Cash Deficiency

A situation where the cash available is not sufficient to cover the expenses or liabilities; often results in the need for additional financing or budget adjustments.

Production Budget

A plan that outlines the number of units that must be produced within a period to meet the expected sales and inventory levels.