Which of the following statements is true of the budgeting process?

Question

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The budgeting process is a continuous process that encourages communication between different departments and helps in identifying potential issues and opportunities that can impact the company's financial performance. It involves setting both quantitative and qualitative targets for the business, which can help in achieving long-term goals. However, setting unrealistic targets or overestimating revenues can lead to the creation of slack, where managers understate expected expenses to meet their targets. The budgeting process does not show the actual performance of the business, as it is based on estimates and assumptions.

Which of the Following Statements Is True of the Budgeting