An operating budget is a projection of:

• A. expected revenues and expenses for a specific period
• B. cash inflows and outflows from investing activities
• C. future changes in the value of fixed assets
• D. the company's equity balances at year-end

Answer: (A)

Verified step by step guidance

1. Understand the concept of an operating budget: An operating budget is a financial plan that outlines expected revenues and expenses for a specific period, typically a fiscal year. It focuses on the company's day-to-day operations rather than long-term investments or financing activities.
2. Differentiate between the options provided: Analyze each option to determine which aligns with the definition of an operating budget. For example, cash inflows and outflows from investing activities pertain to the cash flow statement, not the operating budget.
3. Clarify the scope of fixed assets: Future changes in the value of fixed assets are related to asset valuation and depreciation, which are not part of the operating budget. The operating budget focuses on operational revenues and expenses.
4. Exclude equity balances: The company's equity balances at year-end are part of the balance sheet and are not projected in the operating budget. The operating budget is concerned with operational performance, not financial position.
5. Conclude with the correct definition: The operating budget is a projection of expected revenues and expenses for a specific period, as it provides a detailed plan for managing the company's operational activities effectively.