In which budgeting approach do executive managers create the budget and communicate it down the organization?

The top-down budgeting approach is characterized by executive managers developing the budget at higher organizational levels and then communicating these budgetary allocations and goals down to lower levels within the organization. This method often relies on the strategic direction and priorities set by top management, ensuring that the budget aligns with the overall objectives of the organization.

In this approach, decisions about resource allocation, financial goals, and organizational priorities are made at the upper management level, with limited input from lower-level managers or staff. This can lead to a more streamlined budgeting process, as it eliminates numerous layers of input and can help in maintaining consistent strategic focus across the organization.

In contrast, zero-based budgeting requires each department to justify its budget from scratch each period. The bottom-up budgeting process invites input from lower-level managers to develop a budget that reflects the operational needs more closely, while the operational budget refers to the budget for day-to-day operations and does not specify how it is formulated. Therefore, the top-down budgeting method stands out because of its hierarchical structure and the way it consolidates decision-making at the executive level.