5) Which three of the statements are advantages of using sensitivity analysis? A) It identifies the relationships between various unpredictable variables. B) It can be used when making contingency plans. C) It may lead to an indication of where further investigation might be worthwhile. D) It provides information for decision making.
5) Which three of the statements are advantages of using sensitivity analysis?
A) It identifies the relationships between various unpredictable variables.
B) It can be used when making contingency plans.
C) It may lead to an indication of where further investigation might be worthwhile.
D) It provides information for decision making.
Sensitivity analysis is a management tool that helps determine how different values of independent variables affect a particular dependent variable. Besides finance, it can be useful in many other areas, such as Engineering, Geography, Biology, etc. Let's take a closer look at the strengths and weaknesses of sensitivity analysis.
Sensitivity analysis is a tool that calculates the effect of one independent variable on another. In management accounting, it is used to calculate the change in a company's profits when other factors change. Sensitivity analysis is commonly used in both business research and economics to study the effect of one variable on another. Management must prepare for change that is out of their control. This is commonly known as what-if analysis.
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