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Answer to Question #79338 in Finance for Hugh Heron

Question #79338
What are the likely cost implications for a business which expands rapidly?

To what extent are the employees in a team/ section/ division responsible for:

Data collection to support the budget?
Developing realistic and attainable budgets for the section/ division?
Monitoring expenditure?
Using the budget to measure actual work against projected work achievements?
Expert's answer
1) Financial risk is the most difficult to predict and painful can manifest in this way:
• Increased cash flows and tightened requirements
• Funds needed to service debt exceed cash flow
• Lack of analysis of ROI and capital investment
• Investments in unknown geographic areas and business areas, as well as in expansion of production capacities
• The need to attract additional risk capital

2)
Responsible: Data collection to support the budget.
Partially responsible: Developing realistic and attainable budgets for the section/division.
Responsible: Monitoring expenditure.
Partially responsible: Using the budget to measure actual work against projected work achievements.

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