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 represent the specific, measurable end goals that management aims to attain.
- In this context, the objective is to achieve a 10% increase in sales and a 20% increase in profits.
- Objectives provide measurable direction for all organizational activities.
(ii) Budget:
- A budget is a quantitative financial plan detailing projected revenue, expenses, and cash flow.
- The Finance Manager suggested creating a budget to oversee cash inflows and outflows for target achievement.
- Budgets function as control mechanisms by facilitating the comparison of actual performance against planned figures.