Select the Benefits to a Company of Using Sensitivity Analysis

question 7

Multiple Choice

11ec37eb_8bab_63de_97b9_cd36936cf705__00 Select the benefits to a company of using sensitivity analysis in investment appraisal. (Select all the true statements.)

• A) Sensitivity analysis enables a company to determine the effect of changes to variables on the planned outcome.
• B) Sensitivity analysis enables a company to assess the risk associated with a project.
• C) Sensitivity analysis enables identification of fixed costs that are of special significance.
• D) Sensitivity analysis enables risk management strategies to be put in place to focus on those variables of special significance.

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Definitions:

Direct Method

A cash flow statement preparation approach that lists major classes of gross cash receipts and payments, providing a clear view of a company's operating cash flows.

Operating Activities

The primary revenue-producing activities of a business and other activities that are not investing or financing, which are reflected in the cash flows from operating activities section of the cash flow statement.

Merchandise Inventories

The total value of a company’s products currently available for sale, held by the business as assets.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of a company, as reported in the cash flow statement.