Comment on whether or not ‘Grow the business as much as possible’ is an appropriate budget...

Comment on whether or not ‘Grow the business as much as possible’ is an appropriate budget target. If not, redraft it so it would be suitable to enable ongoing monitoring of financial performance.

Expert Solution

A Budget should always be practically possible and feasible for implementing it in the business organization

A Budget should always be Specific in monetary terms and it should never be open-ended. If we navigate in the particular direction there are higher chances that we will reach our destination, but if we are not aware of our destination and navigating in all possible direction there are higher chances that we will never reach our destination. In the same way a business should have particular Budgeted Targets as a destination which are predetermined, if not it is difficult for the business to use its full potential, survive and grow.

A financial budget presents a company's strategy for managing its assets, cash flow, income, and expenses. A financial budget is used to establish a picture of a company's financial health and present an overview of its spending relative to revenues from core operations.

A budget is generally made to have effective control over the cost with reference to estimated cost. If there is no predetermined estimated cost, there will be no control over the cost and business may incur additional costs without any cost reduction and control. This will have a huge impact on the financial performance of the business and may incur losses to the business.

If the predetermined budget targets are not able to be reached by the business it represents that the budget is not an appropriate one, a budget target should practically possible and feasible for implementing it in the business. In this case instead of targeting to achieve an inappropriate budget and failing often. It's just like running an unwanted race. It's recommended reconsidering the budget as per the business financial operations and related factors.

Therefore we can conclude that "Grow the business as much as possible" is never an appropriate budget target. We should redraft it so it would be suitable to enable ongoing monitoring of financial performance.

ekkarill92 answered 1 year ago

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