How does a master budget differ from an operating budget?

A master budget is a comprehensive financial plan that integrates all aspects of an organization's budget, including all subsidiary budgets such as the operating budget, capital expenditures, cash flow projections, and various departmental budgets. This holistic view allows management to evaluate the overall financial position and strategic direction of the organization.

In contrast, the operating budget specifically focuses on the day-to-day financial operations of the organization. It outlines expected revenues and expenses related to core activities over a certain period, typically a fiscal year. While the operating budget is indeed a component of the master budget, it does not capture the entirety of the organization's financial planning needs.

Thus, the distinction lies in the scope: the master budget encompasses a broader range of financial plans and forecasts, including capital and cash flow considerations, while the operating budget is more narrowly concerned with the operational aspects of revenue and expense management.