Cost Estimates
Estimates of capital and operating expenditures. Cost estimates may require a strategy to be planned out in enough detail to identify required work and purchases. Estimates may be based on expert opinion, parameters and robust techniques such as reference class forecasting.Revenue Estimates
Revenue tells a firm how much money they can potentially spend in a budget independent of current assets and borrowing. Revenue estimates also impact cost. For example, a firm will have more cost for materials if they sell 4 million units as opposed to 1 million units.Business Activities
Estimates of business volumes such as customer call volumes. This has an impact on cost and strategy. For example, a marketing team may budget more than last year if product launches will increase by 50%.Return
Based on cost and revenue forecasts, a return on investment or similar estimates of future cash flows can be calculated. This is a common way to prioritize spending. For example, a project with a 83% return on investment may be more attractive than a project with a 10% return.Risks
Identification and analysis of risks to develop risk estimates for significant expenditures. For example, a project with 50% return and little risk may be more attractive than a project with 60% return that is high risk.Cash Flows
Estimates of cash inflows and outflows based on when revenue and costs occur in time. This is done to ensure that revenue, budgets and funding activities provide a firm with ample liquidity.| Overview: Budget Estimates | ||
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Definition | Forecasts that are used to plan strategy and budgets. | |
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