sensitivity analysis

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Sensitivity analysis

Analysis of the effect on a project'sprofitability of changes in sales, cost, and so on.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Sensitivity Analysis

The analysis of an investment's profitability according to various changes. That is, sensitivity analysis considers potential changes to interest rates, costs, and/or other variables and measures how this will affect the return on the investment. Sensitivity analysis is a form of quantitative research. It can be useful in making investment decisions. It is sometimes called a what-if analysis. See also: Volatility.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

sensitivity analysis

a means of testing the extent to which the results of an analysis of an INVESTMENT project or company budget would change if one or more of the assumptions on which the analysis is based were to change. For example, in estimating the rate of return on an investment, such as a new machine, a firm will need to input various assumptions about the cost of the machine, the anticipated life of the machine, its running costs, annual output, residual value etc. Sensitivity analysis shows how much the expected rate of return on the machine would change if any one of these factors were to be higher or lower than originally expected. Sensitivity analysis thus allows managers to anticipate a range of possible outcomes where uncertainty about the factors involved make it impossible to predict the exact outcome. See UNCERTAINTY AND RISK, DISCOUNTED CASH FLOW.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

sensitivity analysis

Use of spreadsheets to analyze an income-producing property or a development project, and then changing key assumptions in order to view the changes this causes. The creation of a best-case,worst-case,and most-likely-case pro forma is one type of sensitivity analysis.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
What-if analysis is possible realizations, whose purpose is to define the behavior of a complex system, such as a business simulation, or part there-of, under some assumptions are given, call scenarios.
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Buried under What-If Analysis on the Data tab, this obscure feature is commonly used to create a two-variable What-If table.
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Graphical representations of electrical performance at each cell help users identify weak or problematic physical areas and perform what-if analysis to improve the design.
In this study, students are asked to learn from prior examples and thereafter generate alternatives through what-if analysis. Hence, students proceed from CBR to adoption/adaptation/creation.
With more than 150 installations worldwide, PipelineManager provides accurate leak detection and location, batch/ product/composition tracking, capacity determination, throughput optimization, fuel cost minimization, automated operational warnings and survival time, what-if analysis and operator training.
This edition has been updated to include analyses of intangible asset measurement and performance improvement, what-if analysis, and evaluation methods to determine which products and services should be eliminated.
When conducting a what-if analysis, consider these questions: