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budgetary slack



Budgetary Slack is a term that refers, in business finance, to padding the budget by overestimating expenses and underestimating revenue or sales when developing a budget. Budgetary slack may occur if a manager is fearful of termination and pads the budget to avoid termination. This would be an example of the agency costs shareholders face when management operates the business firm as agents of the firm.


Mr. Jones, the Manager of XYZ, Corporation, is guilty of budgetary slack in order to prevent is termination from the firm.

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