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M9-02 lecture
M9-02 lecture
What-If Sensitivity Analysis
What-If Sensitivity Analysis
Sensitivity analysis is the evaluation of outcomes based on uncertainty regarding the inputs. It is used in accounting and finance to understand the impact of a range of input variables - such as interest rates or employee wages - might have on outcomes - such as sales and earnings.
Example
Example
If gas prices increase by 10, 15, or 20 percent, what will be the impact on net income for FedEx? Because fuel is a critical expense for a delivery company like FedEx, management will want to carefully plan around the potential gas price changes from year to year.
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