Final answer:
An operating budget is a plan for day-to-day business operations, while a financial budget focuses on long-term financial goals. Examples of operating budgets include projected sales and operating expenses, while financial budgets include cash flow projections and capital investments.
Step-by-step explanation:
An operating budget is a financial plan for a specific period of time, usually one year, that outlines the projected revenues and expenses of a company. It focuses on the day-to-day operations of the business and helps in making decisions regarding resource allocation and performance evaluation.
For example, a company might create an operating budget that includes projected sales revenue, cost of goods sold, and operating expenses such as rent, utilities, and salaries. This budget allows the company to track its financial performance and make adjustments if needed.
A financial budget, on the other hand, is a plan that focuses on the long-term financial goals of a company. It includes projections for cash flow, capital expenditures, and financing activities like loans or investments.
For instance, a company might create a financial budget that includes projected cash inflows and outflows, capital investments such as purchasing new equipment or expanding production facilities, and financing activities such as taking out a loan or issuing bonds. This budget helps the company align its financial strategies with its long-term objectives.