Question

Which is true of budgets?

a. They are voted on and approved by stockholders.
b. They are used in the planning, but not in the control, process.
c. There is a standard form and structure for budgets.
d. They are used in performance evaluation.

Answer 1

Budgets are an important tool in business used for performance evaluation. While shareholders vote for the board of directors in public companies, they don't vote on budgets directly. Budgets are involved in planning, controlling, and adjusting business strategies. Option d, is correct.

Step-by-step explanation:

A key aspect of business management is the creation and usage of budgets. Among the provided options, the correct statement is that budgets are used for performance evaluation. While stockholders do have significant rights in a public company, such as voting for the board of directors who manage the company's affairs, they do not typically vote directly on budgets. Instead, the management team proposes budgets, which are used in both the planning and control processes of a business. The form and structure of budgets can vary depending on the company's needs and the accounting practices it follows.

Performance evaluation is an essential component of the budgeting process. Budgets provide a financial framework against which actual results can be compared to identify variances and make adjustments if necessary. Thus, budgets are a critical tool for both forecasting future fiscal needs and assessing past performance for strategic decision-making.