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Decision Frame and Evaluation Settings

Define the executive question, scope, horizon, liquidity threshold, and economic basis before forecasting.

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Decision frame and settings

Write the question in a form that names the proposed action and the decision boundary: Should we authorize this project, under what conditions, and with what funding commitment? Record the intended outcome, sponsor, accountable owner, stakeholders, constraints, and success criteria. Financial viability is only one part of the decision; regulatory, mission, capacity, service quality, safety, and strategic fit may also be mandatory.

Choose the horizon based on the projectā€™s economics, not a convenient screen size. Six months may be adequate for a short pilot; expansion with ramp-up or capital investment often needs 18, 24, 36, or more months. The horizon must reveal the meaningful cash low point and, when relevant, break-even and payback.

Settings discipline

  • Opening cash is cash available to this project at the start, not total organization cash unless it is truly committed.
  • Minimum cash reserve is the protected liquidity threshold. Falling below it creates a funding gap even if closing cash remains positive.
  • Discount rate converts future project cash into present value and should reflect the organizationā€™s approved basis and risk policy.
  • Inflation is an escalation assumption. It does not automatically replace specific wage, rent, price, or supplier assumptions.
  • Loan interest belongs in financing cash-flow items; it is not the same as the discount rate.
  • ROI target and maximum payback are optional decision thresholds, not universal truths.

Record who approved the economic settings and when they should be reviewed.