Final answer:
A rolling budget is a budget that updates throughout the year by adding a new period as the last one expires. It is always available for a specified future time period, making it an essential financial tool for continuous planning and assessment.
Step-by-step explanation:
The term rolling budget refers to a type of budget that updates periodically (such as monthly or quarterly) to add a new budget period as the most recent budget period concludes. The correct answer to the question 'Which of the following best describes a rolling budget?' would be: B) It is a budget that is always available for a specified future time period.
Rolling budgets are dynamic and allow businesses to adapt to changes and uncertainties by projecting outwards for a continual period (e.g., the next 12 months), hence avoiding the drawbacks of a fixed annual budget that fails to account for new information or changes in the business environment.
A good budget serves the purpose of tracking income and expenses to inform decisions, such as saving up for important purchases or determining financial priorities. While having a budget might be challenging for some due to the necessity of making choices and giving up certain luxuries, it is crucial for ensuring financial goals are met and expenditures do not exceed income.
Budgeting is a fundamental financial tool, and a rolling budget is particularly useful for continuously assessing a company's financial course and making adjustments as needed, highlighting its significance as a planning, assessing, and decision-making mechanism.