Back-Of-The-Envelope Calculation Definition
A back-of-the-envelope calculation is a form of mathematical calculation carried out quickly just to give a rough estimate of a particular calculation. It is an informal calculation done on an envelope or a piece of paper. This type of rough mathematical calculation is not often accurate, it is just an estimated rounded number computed hastily to create a ballpark figure.
A back-of-the-envelope calculation is often used by salespersons, accountants and even professionals that want to use ballpark figures to give estimate of a present or future result. Although, the result of this calculation is expected to be more accurate than a guess and at the same time not as accurate as a formal mathematical calculation.
A Little More on What is a Back-Of-The-Envelope Calculation
A back-of-the-envelope calculation is often used in science, technology, engineering and mathematical fields. Accountants and financial professionals use this rough and quick calculation to examine whether there is a need to carry out a more detailed calculation.
Professionals, mathematicians and individuals that want to perform a quick mathematical estimation of a figure use the back-of-the-envelope calculation.
For instance, at the World Government Summit in 2017, Elon Musk gave some back-of-the-envelope calculations on how aliens from outer space could possibly reach the earth. Through the use of a back-of-the-envelope calculation, Elon Musk was able to present his predictions of how aliens invade the skies and can also reach the earth.
Reference for “Back-Of-The-Envelope Calculation”
- https://www.investopedia.com › Investing › Financial Analysis