Question

After taking BUS 202, Homer was convinced that a careful and through budgeting process is very important. Which of the following is not a benefit of a careful and thorough budgeting process?

A. Budgeting increases management's awareness of the company's external economic environment.
B. Budgeted net income assures the company of operating profitably.
C. The budget may provide advance warning of pending problems.
D. Budgets provide a yardstick for evaluating future performance.

Answer 1

The correct answer is B. Budgeted net income does not assure the company of operating profitably, as it is a projection, not a guarantee, and actual performance can be influenced by many variables. The correct option is B.

Step-by-step explanation:

After taking BUS 202, Homer realized the importance of a careful and thorough budgeting process. However, among the options provided, the one that is not a benefit of such a budgeting process is: Budgeted net income assures the company of operating profitably.

This is because while a budget can set goals and projections for net income, it does not guarantee profitability. External factors, unforeseen expenses, and sales projections not being met are among the several reasons why the actual performance may differ from the budgeted figures.

A careful and thorough budgeting process does bring several benefits including: A. increasing management's awareness of the company's external economic environment, C. providing advance warning of pending problems, and D. offering a yardstick for evaluating future performance.

However, it is crucial to understand that a budget is a guide and not a promise of future results. The correct option is B.