Sensitivity Analysis Helps You Determine The

question 70

Multiple Choice

Sensitivity analysis helps you determine the:

• A)range of possible outcomes given possible ranges for every variable.
• B)degree to which the net present value reacts to changes in a single variable.
• C)net present value given the best and the worst possible situations.
• D)degree to which a project is reliant upon the fixed costs.
• E)level of variable costs in relation to the fixed costs of a project.

Recognize different types of production functions, including fixed-proportion and variable-proportion systems.

Interpret the effects of input changes on production output levels within different production systems.

Distinguish between increasing, constant, and decreasing returns to scale in production.

Make connections between the slope of isoquants, marginal products of inputs, and the law of diminishing marginal productivity.

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Definitions:

Operating Earnings

Operating earnings refer to the profit a company makes from its normal business operations, excluding non-operating income and expenses.

Depreciation Expense

An accounting method of allocating the cost of a tangible or physical asset over its useful life to account for declines in value.

Half-Year Convention

The half-year convention is a method in depreciation accounting where an asset is assumed to have been in service for half the year, regardless of when it was actually acquired during the fiscal year.

Incremental Depreciation

The additional depreciation expense recorded when there is a change in the estimated useful life or salvage value of an asset.