Certified Financial Management Specialist Practice Exam

What type of budget is designed to manage an organization's operational costs?

1. Fixed Budget

2. Operational Budget

3. Capital Budget

4. Flexible Budget

The correct answer is: Operational Budget

An operational budget is specifically designed to manage an organization's operational costs, which include day-to-day expenses such as salaries, utilities, and supplies. This type of budget outlines the expected revenues and expenses over a particular period, typically a fiscal year, helping organizations plan for their financial activities and monitor their performance against these projections. Operational budgets provide a detailed framework that assists management in making informed decisions about resource allocation and financial strategies. By focusing on operational costs, this budget type ensures that organizations can effectively manage their ongoing expenses while also working towards financial stability and growth. In contrast, other budget types serve different purposes: a fixed budget remains constant regardless of changes in activity levels, a capital budget focuses on long-term investments in assets, and a flexible budget adjusts based on actual activity levels, making it useful for varying operational circumstances but not specifically centered on managing everyday costs.