Final answer:
Budgets are used to communicate with external stakeholders and provide a financial plan for a company's expected revenue and expenses. They help stakeholders understand how the company plans to allocate its resources and generate profits.
Step-by-step explanation:
Budgets are used to communicate with external stakeholders, such as investors, creditors, and shareholders. They provide a financial plan that outlines the company's expected revenue and expenses for a certain period of time. Budgets help stakeholders understand how the company plans to allocate its resources and generate profits. For example, a budget can show how much a company plans to invest in research and development or marketing activities. By sharing this information, budgets enable stakeholders to make informed decisions about their involvement with the company.