For effective budget planning, what should a manager analyze?

To effectively plan a budget, analyzing the past three years of income and expenses is essential. This historical data provides valuable insights into the organization’s financial performance over time, allowing a manager to identify trends, patterns, and potential areas for growth or concern. By examining various income streams and expenditure categories, the manager can develop a more accurate forecasting model for future budgets, informed by real performance metrics.

Understanding historical data also aids in anticipating seasonal fluctuations, adjusting for one-time expenses, and recognizing the impact of previous financial decisions, which is crucial for creating a viable budget that aligns with the organization’s strategic goals. In contrast to other options, relying solely on current feedback or only focusing on the present year's data would overlook the broader context that historical performance provides. Additionally, while awareness of projected changes in legislation is important, it doesn’t replace the necessity for a strong understanding of past financial behaviors, which form the foundation of sound budgetary planning.