The budget of a company is compiled annually. A finished budget usually requires considerable effort and can be seen as a financial plan for the new financial year. While traditionally the Finance department compiles the company's budget, modern software allows hundreds or even thousands of people in the various departments (operations, human resources, IT etc) to contribute their expected revenues and expenses to the final budget.
If the actual numbers delivered through the financial year turn out to be close to the budget, this will demonstrate that the company understands their business and has been successfully driving it in the direction they had planned. On the other hand, if the actuals diverge wildly from the budget, this sends out an 'out of control' signal and the share price could suffer as a result.
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