In free space, received power falls with the square of distance, so each doubling of distance costs about 6 dB. In real environments with ground reflection and obstruction, loss grows faster, often modelled with a path loss exponent between about 2 and 5.
Worked example. A link has transmit power 20 dBm, transmit antenna gain 12 dBi, receive antenna gain 3 dBi, path loss 110 dB, and cable and connector losses of 2 dB.
Received power = 20 + 12 + 3 − 110 − 2 = −77 dBm
If receiver sensitivity is −95 dBm, the link margin is:
−77 − (−95) = 18 dB
That margin is what absorbs fading, rain, foliage and ageing hardware. A link designed with no margin works on the day it is commissioned and fails afterwards, which is the point of the calculation.
Why dB. Gains and losses add in decibels instead of multiplying, so a budget becomes arithmetic. Note that dBm is an absolute power referenced to one milliwatt while dB is a ratio; adding two dBm figures together is meaningless, and it is a common slip.