The CEO of JumpUpandDown Workout Equipment Company remarked to a colleague, \"I

ID: 2377218 • Letter: T

Question

The CEO of JumpUpandDown Workout Equipment Company remarked to a colleague,

"I don't understand why other companies waste so much time and effort in the budgeting

process. I set our company goals, and everyone strives to meet them. What's wrong

with that approach?"

In your approach to this discussion topic, comment on why the CEO may be selling

the budgeting process short, and making it more difficult for his organization to meet

the goals he has set. What is the organization missing by not tying the goal setting

process to a formal budgeting process?

Please provide references with the answer?

Explanation / Answer

By not setting the goals to a specific budget, the CEO is making it more difficult to evaluate the performance of his company. Tieing the goals to a budget allows the CEO and his employees to see how their perfomance relates to the overall financial position of the company, and one of the goals the CEO sets (or should be setting) is to improve the company's financial position.

Here are some references.

http://www.tutor2u.net/business/accounts/purpose-and-role-of-budgets.htm

http://suite101.com/article/the-purpose-of-a-business-budget-a43137

http://www.pwc.com/ua/en/assets/pwc_corporate_budgeting_eng.pdf