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Use Graphical Sensitivity Analysis to Determine the Range of Values

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Essay

Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s1 over which each of the decision alternatives has its largest expected value. Use graphical sensitivity analysis to determine the range of values of the probability of state of nature s<sub>1</sub> over which each of the decision alternatives has its largest expected value.


Definitions:

Allowance for Doubtful Accounts

An accounting method used to estimate the portion of accounts receivable that is expected not to be collected.

Net Realizable Value

The amount (Accounts Receivable – Allowance for Doubtful Accounts) that is expected to be collected.

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services delivered on credit before any deductions for returns or bad debts.

Bad Debts Expense

The cost associated with accounts receivable that are not expected to be collected.

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