The purpose of sensitivity analysis is to show:
A) the optimal level of capital expenditures.
B) how price changes affect break-even volume.
C) seasonal variation in product demand.
D) how variables in a project affect profitability.

Question

Quizplus · Accepted Answer

Sensitivity analysis is a technique used to determine how changes in one variable in a project (such as sales, costs, or interest rates) will impact the overall profitability of the project. The purpose of conducting sensitivity analysis is to identify the key variables that are most likely to impact the success of the project, and to assess the level of risk associated with those variables. Therefore, option D accurately describes the purpose of sensitivity analysis.

The Purpose of Sensitivity Analysis Is to Show