4 Budgeting and forecasting vocabulary

Tools and processes used to plan and predict future financial performance.

budget – a financial plan for a defined period, often one year.

forecasting – the process of making predictions of future financial performance based on current and historical data.

variance analysis – comparing actual results to budgeted or forecasted figures to identify differences.

operating budget – a detailed projection of all expected income and expenses during a certain period.

capital budget – a budget for investments in long-term assets.

cash budget – an estimation of cash inflows and outflows over a specific period.

rolling budget – a budget that is continually updated to extend the budget to a new budget period as the most recent period is completed.

master budget – the aggregation of all lower-level budgets produced by a company's various functional areas.

flexible budget – a budget that adjusts or flexes with changes in volume or activity.