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One of the Behavioral Considerations in Implementing a Budgeting System

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Essay

One of the behavioral considerations in implementing a budgeting system has to do with the issue of budgetary slack.What are the positive and negative aspects of building slack into budgets from: (1)top management's point of view,and (2)the employee's point of view (i.e. ,the individual responsible for building slack into the budget)?


Definitions:

Return on Investment

A financial ratio that calculates the gain or loss generated on an investment relative to the amount of money invested.

Investment Turnover

A financial ratio that measures the efficiency of a company's use of its investments in generating sales revenue.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit divided by the cost of the investment.

Profit Margin

The ratio of net income to revenue, indicating how much profit is made on average from sales.

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