Which of the following best completes the statement: 'The best kind of budget is a _____ budget.'?

• A. incremental
• B. static
• C. flexible
• D. zero-based

Answer: (C)

Verified step by step guidance

1. Understand the concept of budgeting: A budget is a financial plan that estimates income and expenses over a specific period. Different types of budgets serve different purposes based on organizational needs.
2. Learn about the types of budgets mentioned: Incremental budgets adjust previous budgets by adding or subtracting amounts. Static budgets remain fixed regardless of changes in activity levels. Zero-based budgets require justification for all expenses from scratch. Flexible budgets adjust based on actual activity levels.
3. Focus on the term 'flexible budget': A flexible budget is designed to adapt to changes in activity levels or business conditions, making it more effective for dynamic environments.
4. Analyze why a flexible budget is considered the 'best kind': It allows organizations to respond to real-time changes, providing a more accurate reflection of financial performance compared to static or incremental budgets.
5. Conclude that the statement is completed with 'flexible budget' because it aligns with the idea of adaptability and responsiveness in financial planning.