Which components make up a master budget?

The master budget is an overarching financial plan that encapsulates all aspects of an organization's financial activities for a specific period, typically a fiscal year. The reason why the chosen answer is correct is that it encompasses several critical components necessary for comprehensive financial planning.

The operating budget details the revenues and expenses associated with regular business operations, helping organizations anticipate and manage operational income and expenditures. The capital expenditure budget outlines the anticipated investments in long-term assets, ensuring that a company is prepared for future growth or investment needs. The financial budget includes projections regarding the organization’s funding needs along with its anticipated revenue and expenditure plans, which are crucial for maintaining liquidity. The cash budget is vital for cash flow management, providing insight into expected cash inflows and outflows to ensure that the organization can meet its short-term obligations.

Together, these components offer a complete picture of the organization’s financial strategy, enabling effective decision-making. This holistic approach helps in aligning various operational aspects and financial metrics, ensuring all teams within an organization are working toward unified financial goals.