Which of the following should you consider when setting a budget?

• A. Historical stock prices
• B. Current tax laws in other countries
• C. Expected revenues and expenses
• D. The number of employees in unrelated departments

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a budget: A budget is a financial plan that estimates expected revenues and expenses over a specific period. It helps in managing resources effectively and achieving financial goals.
2. Identify relevant factors: When setting a budget, focus on factors directly related to the organization's financial performance, such as expected revenues (income from sales, services, etc.) and expected expenses (costs like salaries, utilities, materials, etc.).
3. Exclude irrelevant factors: Historical stock prices, current tax laws in other countries, and the number of employees in unrelated departments are not directly relevant to budgeting unless they specifically impact revenues or expenses.
4. Analyze expected revenues: Consider factors like market trends, customer demand, pricing strategies, and sales forecasts to estimate the income the organization is likely to generate.
5. Analyze expected expenses: Review costs such as operational expenses, fixed costs, variable costs, and any anticipated changes in expenses to ensure the budget is realistic and comprehensive.