What is a master budget?

A master budget is a comprehensive plan that includes all of the financial activities and operations of a business for a specified period. It is usually prepared annually and consists of several interrelated budgets, including sales, production, operating expenses, capital expenditures, and cash flow.

The master budget serves as a blueprint for the company's financial performance and helps management make informed decisions based on expected revenues and expenses. It is based on the company's strategic plan, goals, and objectives and provides a framework for effective decision-making by aligning resources and activities with the organizational goals.

Once the master budget is prepared, it is continually monitored and updated to ensure that the company's financial goals are being met. Any deviations from the budget are analyzed, and corrective action is taken where necessary.

In summary, a master budget is a financial plan that provides a detailed overview of a company's operations and expected financial performance. It helps management make informed decisions, aligns resources with organizational goals, and serves as a benchmark for measuring actual financial performance.