Budgetary Slack

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DEFINITION of 'Budgetary Slack'

The intentional allowance for extra expenditures in a future cash flow. Budgetary slack can take one of two forms: It can either underestimate the amount of income or revenue that will come in over a given amount of time, or overestimate the expenses that are to be paid out over the same time period.

INVESTOPEDIA EXPLAINS 'Budgetary Slack'

Budgetary slack is generally frowned upon by most accountants. This strategy effectively prevents budgets from working properly. It can even be unethical in some cases, such as when companies intentionally distort these figures in order to achieve certain accounting objectives.

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