How Are Financial Planning Models Constructed

question 26

Essay

How are financial planning models constructed?

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Definitions:

Variable Cost Estimates

Projections of costs that vary directly with the level of output or production volume.

Revenue Variances

The difference between actual revenue and budgeted or forecasted revenue, indicating performance against financial goals.

Fixed Cost Estimates

These are projections of costs that do not change in total with changes in business activity level, such as rent or salaries.

Planning Budget

A financial plan that estimates income and expenditure for a future period.