What is an operating budget?

An operating budget is primarily a financial plan that outlines the expected revenues and expenses for a specific period, usually covering one fiscal year. This budget serves as a vital tool for management, allowing them to make informed decisions about resource allocation, operational efficiency, and financial performance. By providing a detailed financial forecast, the operating budget helps organizations plan for their operational activities to achieve their financial goals.

In contrast to the other options, an operating budget does not focus on long-term capital expenditures, which would typically be covered in a capital budget aimed at investments in fixed assets. It is also not limited to fixed costs; rather, it includes both variable and fixed costs associated with running day-to-day operations. Additionally, it is distinct from personal financial management budgets, which pertain to individual financial planning rather than the broader scope of organizational operations. Thus, the comprehensive nature of an operating budget makes it an essential element for successful financial planning within a business.