Final answer:
The starting point for preparing financial budgets is the operating budget, which sets the stage for all other financial planning, eventually leading to the development of a master budget.
Step-by-step explanation:
The starting point in preparing financial budgets is the operating budget. It serves as the foundation for all other budgets and outlines the projected income and expenditures from the core business operations. This comprehensive plan includes various components such as sales budgets, production budgets, and cost of goods sold budgets, which are critical for creating other financial budgets like the capital budget, cash budget, and eventually the master budget.
Creating an operating budget is essential because it allows an organization to assess its expected revenue and expenses, making it easier to allocate resources and plan for future financial activities effectively. Once an operating budget is in place, the company can pursue its financial planning by preparing the capital budget (focused on long-term capital projects), the cash budget (focused on cash flow), and consolidating all this information into the master budget, which reflects the company's overall financial plan.