If a firm knows that a price change will have an effect on a number of other forecast variables, such as the sales forecast, then the firm might require scenario analysis rather than sensitivity analysis.

Question

Quizplus · Accepted Answer

Scenario analysis takes into account the potential impact of multiple variables on a decision, while sensitivity analysis only considers the effect of changes in one variable. Therefore, if a firm knows that a price change will also impact other forecasts, scenario analysis would be more appropriate to assess the overall impact.

If a Firm Knows That a Price Change Will Have