What does a master budget typically encompass?

A master budget serves as a comprehensive financial plan for an organization, encompassing all individual budgets for a specific period, typically one fiscal year. This can include various components such as sales budgets, production budgets, operating expense budgets, and cash flow budgets. The master budget provides a consolidated view of the organization's overall financial position, allowing management to coordinate and align various departmental budgets towards the company’s strategic goals.

This holistic approach is essential as it integrates all aspects of the business's operations into one document, which aids in performance evaluation, resource allocation, and financial forecasting. By aggregating individual budgets, the master budget becomes a vital tool for managers to make informed decisions, monitor progress against financial targets, and ensure that all parts of the organization are working towards common objectives.