Submitted by angrybird7677 t3_zzswm0 in explainlikeimfive
illachrymable t1_j2fi1rf wrote
Reply to comment by Fmatosqg in ELI5: Why do companies require annual budget be spent 100%? by angrybird7677
You don't have enough info and are sounding like an idiot yourself.
Generally there will be an ROI target, so for every $1 invested, the company expects say $1.10. If you have been averaging a ROI of 9% during the year (so a $1.09 return for every $1 invested), you definitely still want to invest the extra money.
No business has a target of breakeven. There is a hurdle rate they are trying to hit that is a positive return.
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On top of this, because how fixed costs work, spending the last $100 in your budget will usually give you a better return than spending the first $100.
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