Which of the following should be considered when setting a budget to ensure it provides useful information for decision-making?

• A. Historical stock prices of unrelated companies
• B. Personal preferences of individual employees
• C. Expected revenues and expenses for the period
• D. Only the previous year's actual results without adjustments

Answer: (C)

Verified step by step guidance

1. Understand the purpose of a budget: A budget is a financial plan that helps an organization allocate resources effectively and make informed decisions. It should provide relevant and actionable information for decision-making.
2. Identify the key components of a useful budget: A budget should include expected revenues and expenses for the period, as these are critical for forecasting financial performance and planning operations.
3. Evaluate the relevance of historical data: While the previous year's actual results can provide a baseline, adjustments should be made to account for changes in market conditions, business strategies, or other factors that may impact future performance.
4. Exclude irrelevant information: Historical stock prices of unrelated companies and personal preferences of individual employees are not relevant to the budgeting process and should not be considered.
5. Focus on accuracy and adaptability: Ensure the budget is based on realistic assumptions and can be adjusted as needed to reflect changes in the business environment or unexpected events.