Activity 1.14 f) Which of the following statements is most likely to be useful for managers rather than for other users of financial information?

Question

BlackTom AI · Accepted Answer

The question asks which statement would be most useful for managers rather than for other users of financial information.

Given answer: 'b. Budget for the coming financial year' (as provided in the input).

Reasoning about the general idea:
- Budgets are forward-looking financial plans that guide internal decision-making, resource allocation, and performance evaluation within an organization. They are primarily used by management to plan activities, set targets, and coordinate actions across departments.
- Other users of financial information (such as shareholders, lenders, customers, and suppliers) typically rely more on historical financial statements, ratios, and disclosures to assess performance, credit risk, profitability, and sustainability rather than on internal budgets.

If we consider typical alternative statements (though not provided here), the correct choice would usually be something like:
- A budget for the coming year is a managerial tool used to forecast, control, and coordinate operations across the firm, whereas external users focus on actuals and reported results.

Why the provided option is more suitable for managers:
- It directly informs internal planning horizons, capacity decisions, and cash flow management for the next year, which are core managerial concerns.
- It serves as a benchmark for performance evaluation against planned targets, enabling corrective actions and strategic adjustments.

Why other hypothetical options (if present) might be less suitable for managers:
- An option referring to historical financial statements would serve external stakeholders seeking past performance, not the day-to-day internal planning that managers require.
- An option about regulatory compliance reports would be relevant to all users for legal reasons, but not specifically a managerial planning tool.
- An option about externally issued forecasts might interest analysts or lenders, but internal budgeting is uniquely tied to internal decision-making processes.

In summary, the concept of budgeting for the coming financial year aligns with internal management planning, control, and performance assessment, making it most useful for managers compared with other users of financial information.

MCD2150 - T1 - 2025 Week 1 Workshop 2 Quiz

Activity 1.14 f) Which of the following statements is most likely to be useful for managers rather than for other users of financial information?

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