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BBCF_Terminology_8
Section 8: Financial Case
Term | Definition |
---|---|
Affordability | An assessment of whether the proposals can be paid for in terms of cash flows and resource costs |
Funding requirement | The amount, timing and reason for (net) expenditure for an initiative. |
Financial model | A model used to predict the financial performance of an initiative based on known relationships and using (stated) assumptions (e.g. volume growth, inflation, resource costs). |
Budget statement | An estimate of revenues and expenses to whixh an initiative will give rise for a specified period or periods. |
Cash flow statement | A financial statement that summarises the amount of cash and cash equivalents entering and leaving the organisation as a result of investing in an initiative. |
Funding statement | A financial statement that identifies which resource holders (budgetary entities) will commit resources to an initiative; including the level and timing of resource provision. |
Capital charge | The cost of capital multiplied by the amount of invested capital, i.e. the price that must be paid to have the use of capital. |
Working capital | The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. |
Working capital ratio | The ratio of a business's current assets to its current liabilities. |
Return on capital employed | ROCE. The ratio of earnings before interest and taxation to capital employed. |
ROCE | Return on capital employed. The ratio of earnings before interest and taxation to capital employed. |
Return on capital invested. | For an investment opportunity, (i.e. an initiative) Return on capital invested is the expected earnings minus the opportunity cost minus the capital invested. |
Payback period | The length of time required for an initiative to recover its initial outlay in terms of profits or savings. |