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Summary 3.9 Busgeting
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3.9 Budgeting IBM Textbook with ISBN 3.9 Budgeting
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3.9 Budgeting(a) State two other ways to measure the market size of the coach travel industry.
One way to measure the market size of the industry is by its volume of sales (units sold).
Another way is through the value of goods sold (revenue).
(b) Explain the importance of budgeting to businesses such as GDCC.
Budgeting is important for businesses like GDCC as it ensures effective allocation of its
resources to ensure the business is being as efficient and productive. With proper
budgeting, GDCC will have better management of their cash flow in order to ensure they
won’t be making losses. For instance, to celebrate the company’s 20 th anniversary, they are
planning to issue 100,000 free coach tickets to customers. With proper budgeting, it will be
ensured they plan a strategy so the cost of issuing 100,000 free tickets will not bring losses
to the business.
(c) Explain two limitations of using budgeting for GDCC.
Budgets are only used for estimation and does not fully reflect what the business would
require in the future, therefore it is not fully reliable to be used. For instance, it can be
predicted that a business will be able to save up half of its cash flow in the following year,
however, with a sudden pandemic, the business’ budget may not go as planned. Hence, not
fully reliable. Another limitation of using budgeting is that it is time consuming and will have
to be constantly updated as it is only effective for the short term and to meet short term
goals.
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