Sensitivity analysis
Sensitivity analysis is an analysis, which result indicates exactly how much net present value will change in response to a given change in an input variable, other things held constant. Sensitivity analysis is sometimes called “what if” analysis because it answers this type of question.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Sensitivity analysis. Indicates exactly how much net present value will change in response to a given change in an input variable, other things held constant. Sensitivity analysis is sometimes called “what if” analysis because it answers this type of question.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Sensitivity analysis. Percentage change in NPV resulting from a given percentage change in an input variable, other things held constant.
According to Cost Accounting by Horngren, Datar, Rajan (14th edition),
- Sensitivity analysis. A what-if technique that managers use to calculate how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes.
According to Managerial Accounting by Braun, Tietz (5th edition),
- Sensitivity analysis. A what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
