Question

‘Leno' is a reputed car manufacturing company, which is going to complete its 75 years in October 2024. The Chief Executive Officer of the company decided to take the company to a higher level. For this, he called a meeting of all departmental heads of the company. In the meeting, the Chief Executive Officer proposed a target to increase sales by 10 and profits by 20 in its Platinum Jubilee year.
The Human Resource Manager estimated that an increase of 500 workers would be required to achieve the target. The Finance Manager suggested that the company must hold adequate cash balances for various purposes, and he will prepare a statement showing the cash inflows and outflows for this particular period. Identify and explain two types of plans discussed in the above case.

Hint:

Clear objectives and accurate budgeting are essential for aligning organizational efforts and monitoring progress effectively.

Answer 1

(i) Objectives:
- Objectives define the desired future position or end goals that management wants to achieve.
- In this case, the objective is to increase sales by 10 and profits by 20.
- Objectives are measurable and provide direction to all organizational efforts.
(ii) Budget:
- A budget is a financial plan that quantifies future revenue, expenditure, and cash flow.
- The Finance Manager proposed preparing a budget to manage cash inflows and outflows for achieving the target.
- Budgets act as a control device by comparing actual results with planned figures.