It usually goes on a percentage of turnover from the previous season pip.
Not sure what the actual % is in the Championship.
League 1 used to be around 60% and League 2 somewhere near 50%.
It's worked in the lower leagues although I doubt many if any are turning over a profit.
Championship is a different beast, loans can be added in although the FA don't approve of any ott loans. A loan is debt and the owner can call it in at anytime.
Owners can also put ' gift money ' in, giveaway cash they won't want back.Incoming pre-season transfer fees received used to be added in to the pot, not sure if that's still the case.
Club's could always flout the rules like QPR did quite some time ago although the rules have been altered slightly since then.
Club's can't be more than £39M in debt over a three season period, which is why Villa have to trim their wages bill.
My opinion is parachute payments were not brought out so clubs could pay way over the odds for wages.
In Tony we Trust.......no other option atm.
EDIT : Forest had a transfer embargo quite a while ago.
Somehow, somewhere the club may need to squeeze a little bit more out although it seems we haven't yet hit 7k season ticket sales, unless there's been a big rush on the last few days.