Final answer:
Zero-based budgeting is a method that starts each new budget cycle from zero, requiring justification for all expenses, rather than adjusting previous budgets for slight changes.
Step-by-step explanation:
False. Zero-based budgeting does not involve making adjustments to the previous period's budget; rather, it starts from a "zero base" and every new budget cycle begins from scratch. This method requires that all expenses must be justified for each new period. In contrast, traditional budgeting methods might adjust existing budgets based on historical data and anticipated future expenses.
Zero-based budgeting encourages departments to evaluate their actual needs and spending efficiency on a regular basis, instead of relying on incremental changes in their budgets. This thorough review process aims at optimizing costs and ensuring that the company allocates funds to the highest value-added items. However, it can also be more time-consuming and requires a detailed understanding of every aspect of the business.