Glossary

Driver-Based Planning

Driver-based planning is a financial planning approach that focuses on identifying and using key business drivers—such as sales volume, customer acquisition costs, or production rates—to create accurate forecasts and budgets.

Cost Volume Profit Analysis

CVP analysis examines the relationship between fixed costs, variable costs, sales volume, and profit to determine the break-even point and target profit levels.

CapEx: Capital Expenditures

CapEx includes spending on items like buildings, equipment, and technology that a company expects to use for more than one year. This type of spending is different from day-to-day operational costs. Companies record CapEx on their balance sheets and spread the cost over several years through depreciation.

Variance Analysis

Variance analysis helps businesses compare actual results to planned outcomes. It focuses on three main areas: materials, labor, and overhead.

Flexible Budgeting

A flexible budget is a dynamic financial plan that adjusts based on changes in activity levels or output, providing a realistic and actionable approach to financial management.

Budget Variance Analysis

Budget variance analysis compares actual financial results to budgeted values for a given period and analyzes the differences.