What is a master budget?

A master budget serves as the central financial plan for a company, integrating various individual budgets that are typically created for different departments or functions within the organization. This comprehensive document encompasses all aspects of a company's financial operations, including sales, production, operating expenses, and capital expenditures. By consolidating these various departmental budgets, the master budget provides a complete picture of the financial goals and projections for a specific period, often a fiscal year.

The significance of the master budget lies in its utility for management in planning, controlling, and evaluating performance across the entire organization. It helps in setting financial targets, allocating resources effectively, and ensuring that all departments are aligned with the overall strategic objectives of the company.

In contrast to the other options, which either focus on specific aspects of budgeting or limit their scope to reviewing past performance or a particular type of expense, the master budget incorporates a broad and inclusive approach to financial planning. This makes it an essential tool for organizations aiming to achieve cohesive financial management and successful operations.