One of the Behavioral Considerations Associated with the Budgeting Process

question 128

Essay

One of the behavioral considerations associated with the budgeting process relates to the difficulty level embodied in the budget (i.e., how difficult or easy it is to achieve budgeted results).
1.Explain the negative consequences of budgetary targets that are too easy or too difficult to achieve.
2.What is meant by the term "highly achievable (budget) target"?
3.What are the primary advantages of using "highly achievable targets" in terms of budgetary expectations?

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Definitions:

Contributed Capital

The amount of money that shareholders have invested in a company through the purchase of its stock.

Retained Earnings

The portion of net earnings not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Stock Dividends

Dividends paid to shareholders in the form of additional shares of stock instead of cash.

Contributed Capital

The total value of the cash and other assets received by a company from its shareholders in exchange for stock, also known as paid-in capital.