Ontario PHBI Financial Planning & Management Practice Test

The term "budget variance" is defined as the difference between planned financial outcomes and actual financial outcomes. It is a crucial component of financial management and planning, as it allows organizations to measure their financial performance against their budget. This measurement helps identify areas where spending exceeded or fell short of expectations, which can inform future budget adjustments and strategic decision-making.

A budget variance is significant because it provides insights into how well an organization is adhering to its financial plans. By analyzing these variances, finance teams can determine whether results are in line with expectations or if corrective actions are necessary. This feedback loop is essential for effective budget management and forecasting.

The other options do not encompass the full scope of what a budget variance entails. While the first choice touches on expenses, it's limited to that aspect without considering revenues or overall financial outcomes. The third option refers to a method for calculating revenue growth, which is distinct from the concept of variance, and the fourth option about financial risk assessment does not directly relate to the measurement and analysis of budget variances. Therefore, understanding "budget variance" in the context of planned versus actual financial outcomes provides a comprehensive view of financial performance.