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Preparing a Budget by Harvard Business School Press

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Test Yourself

This section offers ten multiple-choice questions to help you identify your baseline knowledge of the essentials of preparing a budget. Answers to the questions are given at the end of the test.

  1. Which of the following is not a true statement?
    1. A budget is an action plan for allocating resources and expenditures.
    2. A budget is a historical record of a company’s financial results.
    3. A budget is a yardstick for measuring managers’ performance.
  2. The most important element of the budget-preparation process is:
    1. The assessment of variances between expected and actual results.
    2. The communication and planning that occur in preparing a budget.
    3. The end result—the operating, capital, or cash budget that is created.
  3. One significant disadvantage ...

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