Can you explain what a flexible budget is?

A flexible budget is a financial plan that adjusts based on changes in activity levels or volume. Unlike a static budget, which remains fixed regardless of actual performance, a flexible budget allows organizations to account for variations in revenue and expenses, providing a more accurate reflection of financial performance. To elaborate, what exactly is a flexible budget? How does it differ from a traditional budget? What are the key benefits of using a flexible budget in financial planning and analysis? Additionally, how can businesses effectively implement a flexible budget to enhance their financial management? In summary, a flexible budget is a dynamic financial tool that adapts to varying levels of activity, offering a more precise view of an organization's financial situation. It contrasts with traditional budgets, which do not change with actual performance. The advantages of a flexible budget include improved accuracy in financial forecasting and better resource allocation. Furthermore, businesses can successfully adopt a flexible budget by integrating it into their financial management practices, allowing for more responsive and informed decision-making.